Corporate Pension Funding Falls 3% in Rough 2nd Quarter

The funding ratio of the typical corporate pension plan dropped to 80% in the second quarter of 2016, down from 83% in Q1.

The data comes from UBS’ US Pension Fund Fitness Tracker, which aggregates data from 500 large corporate pensions.

More on the funding change from UBS:

The fall in Treasury yields during June caused liability values to increase in the second quarter of 2016. Investment returns of 2.1% could not keep up with the return on liabilities over the quarter, causing funding ratios to once again decrease. These estimates are based on the average corporate plan’s reported asset allocation weightings from the UBS Asset Management Pension 500 Database and publicly available benchmark information.

The rather unexpected outcome of the recent referendum in the UK, where voters requested that the UK leave the European Union, has been the main headline in the financial press. Economic estimates suggest that the UK will be the country that will lose most from the voters’ decision. Some negative effects in Continental Europe are likely, while the other continents can expect minimal impact.

The US economy has continued to thread along without big surprises. A rather weak employment number in June encouraged the data-driven Fed to wait a little longer before increasing the target rate. At least one rate increase, maybe two, before the end of 2016 is possible because the labor market is tightening, the fundamentals of the economy remain solid, and inflation is converging toward the expected range around 2%.

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