Pension Indicator Updated for July 31, 2018

Pretty, Pretty, Pretty Good July

By: Grant Guyuron, Senior Managing Director, Hartland

HBO’s Curb Your Enthusiasm, starring Larry David, is one of my favorite television shows. In every episode, Larry finds himself in quandaries because of his impulsiveness and neurosis…and it’s hilarious.  One of his tag lines when he’s asked “how are you?” is to say “pretty, pretty, pretty, good” in an overly exaggerated response, but it rarely ends up that way. Looking at the equity market performance in July, many plan sponsors are feeling pretty good themselves!  Return generating assets outpaced the estimated growth in liabilities, so many plan sponsors experienced improvement in their funded status.

With the earnings season in full swing, the markets were able to refocus on fundamentals, which have been strong. U.S. equities produced positive results across the board in July.  The trade war and spillover concerns remain a market overhang, and despite the uncertainties, the international equity markets generally rebounded.   U.S. equity markets, as measured by the S&P 500, were up 3.7% in July, while international equities were also positive.  U.S. Treasury yields generally rose across the board, but credit-related assets generated positive returns due to their yield advantage and spread compression. Emerging market bonds rebounded from their recent sell-off in May and June.

This year has been a successful one for most plan sponsors as measured by an improvement in funded status.  Liabilities have declined somewhere between 4.5-6.5% on average, so depending on the plan’s asset allocation, it is conceivable that most plans have experienced 3-5% increase in funded status (assuming the portfolio is not fully hedged to its liability).  This is as good of a time as any to revisit strategy and confirm that everyone is feeling “pretty good” about how objectives will be met.

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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) 6.0% 4.9% 2.8% 0.0%
 Recently Frozen 7.6% 6.5% 4.4% 1.6%
 Ongoing Traditional 9.4% 8.3% 6.1% 3.3%
 Cash Balance 6.5% 5.4% 3.3% 0.5%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 1.1% 0.8% 0.8% 0.7%
 Recently Frozen 0.9% 0.6% 0.6% 0.5%
 Ongoing Traditional 0.6% 0.4% 0.3% 0.2%
 Cash Balance 1.1% 0.8% 0.7% 0.7%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 12.1% 10.6% 8.6% 5.6%
 Recently Frozen 12.2% 10.7% 8.7% 5.7%
 Ongoing Traditional
12.3% 10.8% 8.8% 5.7%
 Cash Balance 12.4% 10.9% 8.9% 5.9%

FrozenManyYears0718 Revised

RecentlyFrozen0718 Revised

Ongoing0718 Revised

CashBalance0718 Revised

Disclosure