Pension Indicator Updated for November 30, 2016

November 2016: Liabilities Euchred

By: Mike Shebak, Senior Managing Director, Hartland

Trump won in November, and the subsequent rally in the equity markets, and sharp increase in market interest rates, was welcomed by pension plan sponsors.  Liabilities declined, assets increased, and plan funding levels greatly improved across the board during the month.  For the first time in a while, plan sponsors held the right cards, and liabilites where euchred. 

Market and Pension Indicator

Donald Trump pulled off a stunning victory in November and the U.S. equity markets rallied as optimism reigned amidst data suggesting ongoing domestic growth remains intact.

The S&P 500 returned 3.7% whereas small caps as measured by the Russell 2000 advanced 11.2%.  U.S. Treasury yields have risen signficantly in the last three months. 

The 10-year U.S. Treasury yield closed November at 2.38%, up 55 basis points for the month (from 1.83%).  Since the July low ratess (1.38%), the 10 year yield has moved 1% higher.  The markets are now pricing in a strong likelihood of a December rate hike.  The BarCap Aggregate Index returned -2.4$ during the month.

These movements were beneficial to plan sponsors as funding levels improved up to 7.2% depending on the plan type and asset mix. 

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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.

January 1, 2016 to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 0.9% 0.7% 1.0% 1.5%
 Recently Frozen -0.3% -0.5% -0.1% 0.3%
 Ongoing Traditional -1.4% -1.6% -1.3% -0.8%
 Cash Balance 0.6% 0.4% 0.8% 1.2%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 4.4% 3.4% 1.9% 0.0%
 Recently Frozen 5.7% 4.8% 3.2% 1.3%
 Ongoing Traditional 7.2% 6.3% 4.7% 2.8%
 Cash Balance 4.8% 3.8% 2.3% 0.4%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 3.4%  3.3% 3.9% 4.8%
 Recently Frozen 2.5% 2.4% 3.0% 3.8%
 Ongoing Traditional 1.5% 1.4% 1.9% 2.8%
 Cash Balance 3.3% 3.2% 3.7% 4.6%