In Large Corporate DB Plans, Bonds Now Outweigh Stocks: Report

Pension360 doesn’t often cover corporate pension plans, but this news is interesting and noteworthy: for the first time since at least 2002, large corporate DB plans are holding more bonds than equities, according to Goldman Sachs data.

From the Wall Street Journal:

The 50 largest defined benefit plans in the S&P 500 held 41% of their $941.7 billion in total assets in bonds last year and 37% in stocks, according to Goldman Sachs Asset Management. That’s the first time bonds have outweighed stocks since at least 2002, when the firm started tracking the data.

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By increasing their holdings of long-term bonds, companies can more closely match their returns to their future commitments. Such asset-and-liability matching allows companies to limit the volatility of their pension obligations and lock in gains.

The strategy also can reduce the hit a company’s earnings might take if the value of its pension plan’s stockholdings fall, and can make a pension plan more attractive to outsiders, reducing the premium a company might have to pay to shift its pension burden to a third party.

Citi reported earlier this month that the funding levels of the country’s largest corporate DB plans fell from 81 to 80 percent in March.

Photo by Sarath Kuchi via Flickr CC License