September’s Investment Losses Interrupt Five Months of Milliman 100 PFI Asset Gains
Milliman, Inc., a premier global consulting and actuarial firm, released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest US corporate pension plans.
A rise in discount rates during September countered a 1.68% investment loss for corporate pensions, leaving the funded status of the Milliman 100 PFI nearly flat for the month. The market value of assets declined by $38 billion while the monthly discount rate climbed from 2.65% in August to 2.78% in September, resulting in just a slight funded status increase of $1 billion compared to the month prior. The funded ratio remained flat during this time, at 97.3%.
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“September’s investment losses interrupted five consecutive months of asset gains for corporate pensions, dampening an otherwise strong third quarter,” said Zorast Wadia, author of the Milliman 100 PFI. “Meanwhile discount rates have been headed in the right direction for the past two months, but still remain low compared to prior years.”
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Looking forward, under an optimistic forecast with rising interest rates (reaching 2.93% by the end of 2021 and 3.53% by the end of 2022) and asset gains (10.2% annual returns), the funded ratio would climb to 101% by the end of 2021 and 117% by the end of 2022. Under a pessimistic forecast (2.63% discount rate at the end of 2021 and 2.03 % by the end of 2022 and 2.2% annual returns), the funded ratio would decline to 95% by the end of 2021 and 87% by the end of 2022.
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