Institutional Investors End 2018 Down More Than 4%

“Equity exposure weighed on plan performance in the fourth quarter,” says Jason Schwarz, president, Wilshire Analytics and Wilshire Funds Management.

Institutional assets tracked by the Wilshire Trust Universe Comparison Service (TUCS) posted all-plan median returns of -7.05% and -4.05% for Q4 2018 and year-end 2018, respectively.

This is the worst one-year performance since the 2008 financial crisis when TUCS posted a 24.79% loss.

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“Equity exposure weighed on plan performance in the fourth quarter, as geopolitical concerns, earnings revisions and higher interest rates led to a deterioration in investor sentiment,” says Jason Schwarz, president, Wilshire Analytics and Wilshire Funds Management.

Corporate funds saw a fourth quarter loss of 5.68% and a one-year loss of 4.22%, while public funds posted a 7.51% loss for the quarter and 4.05% loss for the year. According to TUCS, corporate funds’ allocation to equities was 30.68% and their allocation to bonds was 40.95%, while the allocations for public funds were 41.6% and 24.37%, respectively.

Foundations and endowments posted a Q4 loss of 7.52% and a 2018 yearly loss of 4.48%. Taft Hartley defined benefit plans saw losses of 7.61% and 3.48%, respectively.

U.S. equities, represented by the Wilshire 5000 Total Market Index, fell 14.29% for the fourth quarter and 5.27% for the year. International equities, represented by the MSCI AC World ex U.S. fell 11.46% and 14.2% for the quarter and year, respectively. U.S. bonds, represented by the Wilshire Bond Index, increased 0.86% in the fourth quarter, but fell 0.76% for the year.

PBGC Issues Proposal for Computing Withdrawal Liability Under Multiemployer Plans

The proposed amendments would affect the determination of a withdrawing employer's liability under a multiemployer plan and annual withdrawal liability payment amount when the plan has had benefit reductions, benefit suspensions, surcharges or contribution increases that must be disregarded.

The Pension Benefit Guaranty Corporation (PBGC) issued a proposal to amend its regulations on Allocating Unfunded Vested Benefits to Withdrawing Employers and Notice, Collection, and Redetermination of Withdrawal Liability.

The proposed amendments would implement statutory provisions affecting the determination of a withdrawing employer’s liability under a multiemployer plan and annual withdrawal liability payment amount when the plan has had benefit reductions, benefit suspensions, surcharges or contribution increases that must be disregarded. The proposed amendments would also provide simplified withdrawal liability calculation methods.

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The proposed changes would provide guidance and simplified methods for a plan sponsor to:

  • Disregard reductions and suspensions of nonforfeitable benefits in determining the plan’s unfunded vested benefits for purposes of calculating withdrawal liability;
  • Disregard certain contribution increases if the plan is using the presumptive, modified presumptive, and rolling-5 methods for purposes of determining the allocation of unfunded vested benefits to an employer; and
  • Disregard certain contribution increases for purposes of determining an employer’s annual withdrawal liability payment.
The agency is requesting comments on its proposal be submitted on or before April 8.

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