Pension Indicator Updated for June 30, 2017

Christmas in July

By: Matthew Klein, Principal, Findley Davies, Inc.

Okay, this Pension IndicatorTM update is technically through June 30th, but the joy by plan sponsors will certainly be celebrated in July.  June itself was a mixed bag of results.  The yield curve flattened, with longer durations decreasing in yield and shorter term rates increasing in yield.  That helped to squeeze out a small positive for the month for plans with shorter tails.  The decreasing long-term yields helped boost bond prices and hence those plan utilizing LDI strategies were rewarded.

Looking in totality of the 2016-2017 fiscal year that just ended for many plan sponsors, regardless of your investment strategy, you probably consider the past year a win.  If your investment strategy is to invest more heavily in equities and take the risk in search of higher returns, you should have been rewarded.  The “Balanced” portfolio in our model returned over 9% and the “Aggressive” portfolio returned over 11%.  With corporate bond yields coming in close to where they were a year ago, plan sponsors clearly improved their funded status as well as exceeded the expected rate of return.

For those plan sponsors that are employing LDI strategies to avoid downside risk, you too achieved your goal.  While the improvement is not as dramatic as those who took the risk, there will still be some modest improvement, and clearly the downside risk never occurred.

It’s not very often that everyone can walk away happy with the results that we post here.  This is why it does feel like Christmas in July.  In fact, we should make it a holiday.  And look, July 25th is a Tuesday this year.  Who couldn’t use a four-day weekend?

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

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The opinions expressed are that of the author and not necessarily those of Findley Davies or Hartland.

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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.

Year to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 2.8% 2.3% 2.4% 2.0%
 Recently Frozen 1.4% 0.9% 1.1% 0.7%
 Ongoing Traditional 0.0% -0.5% -0.3% -0.7%
 Cash Balance 2.5% 2.0% 2.1% 1.8%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 0.1% 0.1% 0.3% 0.6%
 Recently Frozen -0.2% -0.2% -0.1% 0.2%
 Ongoing Traditional -0.7% -0.7% -0.5% -0.2%
 Cash Balance 0.2% 0.1% 0.3% 0.6%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 16.4% 13.7% 11.4% 7.9%
 Recently Frozen 17.0% 14.3% 12.0% 8.4%
 Ongoing Traditional


14.9% 12.6% 9.0%
 Cash Balance 16.8%


11.9% 8.3%