Pension Indicator Updated for April 30, 2020

Coronavirus and More Coronavirus

By: Matthew Klein, Principal, Findley

Looking at my contemporary Grant’s article from last month, he stated that worldwide there were 1.3 million cases and 70,000 deaths from Coronavirus. A month later and we are approaching both of these figures in the United States alone.1 We know the damage done thus far with record-setting levels of new unemployment claims. Many companies have postponed or scrapped planned expansions and immediately shifted into crisis mode, just trying to weather the storm. Lawmakers are in an exceedingly difficult position of trying to save lives but also re-start an economy that has fallen into recession (although this won’t be official for many months).

Now that we are nearly two months into this crisis, there are signs that everyone is adjusting to this new state.  The VIX volatility index, which peaked over 80 in mid-March (higher than the highest level during the financial meltdown of 2008)2, is down into the mid-30s at the time this is published.  The inverted US corporate bond yield curve that was present a month ago has disappeared.  However, in its wake, corporate bond yields are 100+ basis points below this time last year.3  With the upcoming June 30 fiscal year-end for many plan sponsors, already ugly balance sheets are very likely to take a significant hit from the pension plan as well.  Meanwhile, economists debate what shape the recovery might take and the possibility for a resurgence of Coronavirus cases as some states begin to open up again.  Although there are signs that we are adjusting to this new state, a lot of uncertainty still remains.

From all of us at Findley and Clearstead, we hope everyone and their families are safe and healthy. 

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

This email address is being protected from spambots. You need JavaScript enabled to view it. or Clearstead  to discuss this information further.

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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.

1https://informationisbeautiful.net/visualizations/covid-19-coronavirus-infographic-datapack/ 

2https://www.cnbc.com/2020/03/16/wall-streets-fear-gauge-hits-highest-level-ever.html

3FTSE Pension Liability Index

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) -13.5% -10.1% -6.9% -3.3%
 Recently Frozen -14.8% -11.5% -8.3% -4.8%
 Ongoing Traditional -16.1% -12.8% -9.7% -6.3%
 Cash Balance -13.8% -10.4% -7.3% -3.7%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 2.2% 1.5% 1.4% 1.2%
 Recently Frozen 1.2% 0.6% 0.5% 0.3%
 Ongoing Traditional 0.3% -0.4% -0.4% -0.6%
 Cash Balance 1.8% 1.1% 1.1% 0.9%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -12.4% -8.3% -3.6% 1.8%
 Recently Frozen -16.1% -12.2% -7.7% -2.5%
 Ongoing Traditional
-19.7% -16.0% -11.7% -6.7%
 Cash Balance -13.3% -9.3% -4.6% 0.8%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure