Public Plans and Foundations and Endowments Also Gain

BNY Mellon Introduces Institutional Scorecard

NEW YORK, August 5, 2013 — The funded status of the typical U.S. corporate pension plan in July increased 1.6 percentage points to 88.2 percent, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG). Year to date, the funded ratio is up 11.1 percentage points, ISSG said.

The funded status for June 2013 and all prior months have been updated to reflect the changing asset mix of corporate pension plans.  These plans increasingly have been implementing liability driven investing programs, which raise allocations to long maturity corporate bonds.   The new asset mix also reflects an allocation to alternative asset classes.

Another change in July is the new name of the pension funding report, the BNY Mellon Institutional Scorecard, as the report now includes information about U.S. public plans and foundations and endowments.

"The new funded status numbers better explain the strategies being implemented," said Jeffrey B. Saef, managing director, BNY Mellon Investment Management, and head of the ISSG.  "The historical information also was revised to keep the comparisons relevant."

Saef added that the new information on public plans and foundations and endowments was added in response to requests from clients.  "Our original report on corporate plans has been enthusiastically welcomed, and we added the new information as clients in those sectors began requesting it."

For U.S. corporate pension plans, the July improvement was driven by a 2.7-percent increase in assets, which was propelled by strong U.S. equity returns.  Liabilities for the typical plan increased 0.9 percent as the discount rate on Aa corporate bonds fell four basis points to 4.65 percent.

Plan liabilities are calculated using the yields of long-term investment grade bonds.  Lower yields on these bonds result in higher liabilities.

In the public sector, typical defined benefit portfolios outpaced their annualized 7.5 percent return target, as assets rose 3.3 percent over the month.  For the month, the excess return for these plans was 2.7 percent as strong equity market returns were the main drivers for this positive performance.   Year-to-date, plan assets are ahead of the return target by 2.6 percent.

Assets for typical U.S. endowments and foundations rose 3.0 percent in July, outpacing their annual target of 5.0 percent spending plus inflation.

"Trends were positive for all three categories, although public defined benefit plans did the best with their 3.3 percent gain in assets," said Saef.   "Endowments and foundations, with heavier allocation to alternatives, were slowed as alternatives underperformed the public equity markets."

The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at http://www.bnymellon.com/.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2013, BNY Mellon had $26.2 trillion in assets under custody and/or administration, and $1.4 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on http://www.bnymellon.com/, or follow us on Twitter @BNYMellon.

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