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SOURCE BNY Mellon
Worst Month since May 2012
NEW YORK, Feb. 4, 2014 /PRNewswire/ -- U.S. corporate pension plans in January 2014 gave up all of the gains they had achieved in the fourth quarter of 2013 as the funded status of the typical plan slid 4.2 percent to 91.0 percent, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG). The BNY Mellon Institutional Scorecard for January noted falling interest rates sent liabilities higher and declining stocks sent assets lower.
Public defined benefit plans, endowments and foundations also lost ground in January as a result of the falling equity markets, ISSG said.
"January's decline was the largest monthly drop in funded status for U.S. corporate plans since May 2012," said Andrew D. Wozniak, director, portfolio management and investment strategy, ISSG.
For U.S. corporate plans, assets fell 0.4 percent and liabilities increased 4.2 percent, ISSG said. The increase in liabilities was due to a 27 basis-point decline in the Aa corporate discount rate to 4.66 percent, the report said. Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower yields on these bonds result in higher liabilities.
"Investors became more concerned about global growth fundamentals and the prospects for some emerging markets," Wozniak said. "As they became more cautious, assets shifted to bonds, sending rates lower."
On the public side, assets at the typical defined benefit plan in January fell nearly 1.4 percent, missing the plans' monthly goal of positive 0.6 percent returns, ISSG said. Year over year, public plans are ahead of their target by 1.5 percent, ISSG said.
For endowments and foundations, the real return was -1.4 percent, which was short of its target for spending plus inflation, ISSG said. The report said assets fell 0.9 percent. Investments in real estate and hedge funds helped endowments and foundations to mitigate their assets losses for the month, the report said.
Mellon Capital Management, BNY Mellon's San Francisco-based multi-asset manager, was optimistic about the prospects for improving funded status over the longer term.
"Despite worries about growth and uncertainty in select emerging markets, we expect global growth to improve this year supporting equity prices and providing a headwind for fixed income," said Vassilis Dagioglu, managing director and head of asset allocation portfolio management at Mellon Capital.
Notes to Editors:
The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.
Founded in 1983 by innovators in the investment management field, Mellon Capital Management Corporation applies a disciplined and analytical approach to global investment management strategies. As of December 31, 2013, the firm had $354.7 billion in assets under management, including assets managed by dual officers of Mellon Capital Management Corporation, The Bank of New York Mellon and The Dreyfus Corporation, and $6.1 billion in overlay strategies. Additional information about Mellon Capital is available at www.mcm.com. It is part of BNY Mellon Asset Management, one of the world's largest asset managers.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.6 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 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 December 31, 2013, BNY Mellon had $27.6 trillion in assets under custody and/or administration, and $1.6 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 www.bnymellon.com, or follow us on Twitter @BNYMellon.
All information source BNY Mellon as of December 31, 2013. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance. A BNY Mellon Company.
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