Pension Indicator Updated for June 30, 2016

June 2016: “It could have been worse”

By: Matt Klein, Principal, Findley Davies

It is little consolation to plan sponsors to say “It could have been worse,” but it is a true statement. While equities tanked in the couple of days following the Brexit vote, the last three trading days of the month brought things back from the brink. Still, no plan sponsor will be happy with the overall results. Discount rates for most plans will likely be around 75 basis points lower than last year. Asset returns, at best, met the return assumption. The only thing that might pass as a silver lining to plan sponsors is those who adopted the full RP2014/MP2014 mortality set last year could see some small relief by moving to the most recent RP2014/MP2015 tables.

We all resolved a few years ago to stop saying that interest rates couldn’t get any lower because we were tired of being wrong. Lo and behold, rates are at the lowest point of my lifetime, and if they go any lower, they will be the lowest of the lifetime of anyone reading this article. With an uncertain election year ahead featuring two of the most controversial candidates in history and an uncertain economy, it is even more difficult to forecast the short-term future of both bond yields and equity returns.

PS, I have to give credit to my colleague Mike Shebak, who pulled off the difficult-to-execute reverse jinx last month saying that Cleveland had gone 52 years without a major sports title. Congrats, Cleveland!

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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results.

July 1, 2015 to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) -6.1% -4.8% -2.5% 0.8%
 Recently Frozen -8.8% -7.5% -5.3% -2.0%
 Ongoing Traditional -11.6% -10.4% -8.2% -5.1%
 Cash Balance -6.8% -5.6% -3.2% 0.0%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) -2.5% -1.9% -1.1% -0.1%
 Recently Frozen -3.4% -2.8% -2.1% -1.0%
 Ongoing Traditional -4.4% -3.8% -3.0% -2.0%
 Cash Balance -2.8% -2.2% -1.4% -0.3%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) -7.5%  -5.6% -2.1% 3.4%
 Recently Frozen -10.5% -8.6% -5.2% 0.2%
 Ongoing Traditional -13.6% -11.8% -8.5% -3.4%
 Cash Balance -8.4% -6.5% -3.0% 2.5%