Corporate pension plans experienced mixed results in funded status in January as equities took a dive and interest rates went up amid persisting inflation and anticipated rate tightening by the Federal Reserve. Interest rates increased and yields flattened across the curve resulting in negative returns for fixed-income mandates and lower liability valuations. Total-return plans with higher duration liabilities and lower fixed-income allocations may have experienced an increase in funded status as opposed to LDI-focused peers holding more long-dated bonds. Based on NEPC’s hypothetical open- and frozen-pension plans, the funded status of the total-return plan increased 1.5%, while the LDI-focused plan declined 0.9% in January.
The funded status of the total-return plan increased by 1.5% as losses from equities were offset by declining liability values.
The funded status of the LDI-focused plan dropped 0.9%, with asset losses stemming from both equities and long-duration bonds. The plan is 77% hedged as of January 31.
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