Spurs growing interest in liability driven investment strategies

BOSTON, February 3, 2010 — Sliding stock markets and rising liabilities combined to reduce the funded status of the typical U.S. corporate pension plan in January by 1.8 percentage points to 83.7 percent, according to monthly figures published by BNY Mellon Asset Management. It was the first decline in funding status since October.

Assets for the typical U.S. corporate pension plan fell 1.6 percent and liabilities increased 0.5 percent for the month, as reported by the BNY Mellon Pension Summary Report for January 2010.

"Economic concerns weighed on U.S. stocks, which was the primary factor driving assets lower for the month," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "International stocks fell even more than U.S. stocks, further contributing to the asset decline. The yields on long Aa corporate bonds were mostly unchanged, but liabilities increased slightly due to interest accruals."

Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Higher yields on these bonds result in lower liabilities.

"The sudden reversal of stock markets in January is a good reminder that volatility can quickly return to the markets and impact the funded status of corporate pension plans," said Austin. "While the funded status of plans improved significantly in 2009, the January performance reminds plan sponsors that risk is inherent in corporate pension plans, and requires close monitoring of plan assets to ensure that risk/return relationships are consistent with company objectives. We are seeing an increase in liability driven investing (LDI) activity as more corporate plan sponsors seek solutions for their pension risk exposure."

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.3 trillion in assets under custody and administration, $1.1 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as at December 31, 2009. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Asset Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.
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