Pension Indicator Updated for February 28, 2017

March 2017: Never Again is What You Swore the Time Before...

By: Matthew Klein, Principal, Findley Davies

There isn't anything interesting in the month-over-month results in this edition of the Pension IndicatorTM.  My guess, if anything, is that the reader might be surprised that the results weren't better given the run-up in US equities.  US Treasury yields went down during February and then quickyl jumped back up in the first couple days of March.

So let's look at the bigger picture.  Look at the charts below.  Aren't they beautiful?  If you are the sponsor of an underfunded pension plan (i.e. most of you), this is especially sweet.  Many plan sponsors have been riding the hibernation wave waiting for stocks to move up and bond yields to increase to avoid paying through the nose for plan termination.

I am not an investment advisor, but as an actuary inevitably you get pulled into conversations about what the future holds.  To which I usually respond that I'm not an economist either.  Instead, maybe I can be a historian.  The last time things were going this well was 10 years ago.  People were finally starting to feel good about coming out of the 2002 recession and US equities were hitting all-time highs.  The concept of Asset-Liability Matching was still a pretty new concept to most lay people.  But as I would have conversations with plan sponsors (usually with the investment advisor around as well), it was always a tough sell to convince a plan sponsor to match up the duration of the liabilities of the plan with fixed income (long-term fixed income at that).  Things were going well, so why wouldn't they continue?  Invariably, almost all plan sponsors have been kicking themselves since 2008 for not doing more to preserve funded status.

No one knows when the markets will move, and Investing 101 tells you that it's impossible to time the market.  But based on your own plan's situation, it might be time to have another discussion about your investment mix.  Let me be clear, I am not predicting doom, and at present conventional wisdom is that fixed income is up for some tough sledding as expectations are for multiple Fed increases in the short-term.  Evaluate, think, and make informed decisions.  I just want to avoid history repeating itself.

As always, thanks for reading, and drop us a comment on how we're doing.

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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.

March 1, 2017 to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 2.0% 1.6% 1.3% 0.7%
 Recently Frozen 1.6% 1.2% 0.8% 0.2%
 Ongoing Traditional 1.1% 0.7% 0.4% -0.2%
 Cash Balance 1.9% 1.5% 1.1% 0.5%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 0.6% 0.4% 0.4% 0.4%
 Recently Frozen 0.1% -0.1% -0.1% -0.1%
 Ongoing Traditional -0.5% -0.6% -0.6% -0.6%
 Cash Balance 0.4% 0.3% 0.3% 0.3%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 15.8% 13.1% 11.2% 8.6%
 Recently Frozen 14.9% 12.2% 10.3% 7.7%
 Ongoing Traditional 13.8% 11.2% 9.3% 6.7%
 Cash Balance 15.7%


11.1% 8.5%