As global stock markets have rallied in recent weeks, the funding status of the typical U.S. corporate pension plan has increased, according to an asset management company.
The estimates from The Bank of New York Mellon Asset Management suggest that the funding of the typical plan improved by 0.5 percentage points to 79.7 percent at end of August, up from 79.2 percent at the end of July.
"Six straight months of improving stock markets have bolstered the assets of these plans, which is good news given the corresponding decline in Aa corporate bond yields," says Peter Austin, executive director of BNY Mellon Pension Services.
He further added that the stabilization of the markets combined with attractive corporate bond nominal yields have resulted in greater demand for high quality bonds, much of it generated by corporate pension plan sponsors seeking to better manage risk and reduce volatility.
The report also found that assets for the typical moderate risk portfolio increased 2.7 percent during the month, while the liabilities rose by only 2.1 percent. For the year through August 31, the funding ratio for the typical plan was up 5.8 percentage points.
The Bank of New York Mellon Corporation is a financial services company operating in 34 countries. It has $20.2 trillion in assets under custody and administration, $928 billion in assets under management, services more than $11 trillion in outstanding debt and processes global payments averaging $1.8 trillion per day.