Investing June 4, 2012

Stable Value Funds Still Strong Investment

June 4, 2012 (PLANSPONSOR.com) – Stable value funds continued to significantly outperform money market funds, according to a survey from the Stable Value Investment Association (SVIA).
Reported by

During the first quarter, stable value fund assets saw returns of 2.73%. iMoney Net Money Market Funds only had a 0.03% return during that time.

Assets in stable value funds have risen by 27% since the start of the survey in the last quarter of 2008, when assets totaled $347 billion.  Crediting rates have declined over the survey period, which reflects the low interest rate environment, but stable value crediting rates continue to offer a considerable premium over money market funds for defined contribution retirement plan participants.

The survey, which SVIA has taken every quarter since the fourth quarter of 2008, includes data provided by 24 stable value managers who collectively manage $441 billion in assets.

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Administration June 4, 2012

Aggregate Pension Plan Deficit Grows in May

June 4, 2012 (PLANSPONSOR.com) – Pension plan funding gains in the first quarter were wiped out in April and May, according to a report from Mercer.
Reported by

 The aggregate deficit in pension plans sponsored by S&P 1500 companies increased $80 billion during May, to $488 billion. This deficit corresponds to an aggregate funded ratio of 76% as of May 31, compared with a funded ratio of 79% as of April 30, and just barely above the funded ratio from 75% at December 31, 2011.

Mercer attributes the decrease in funding status to the falling equity markets and an increase in liabilities because of declining interest rates. Interest rates on high quality corporate bonds, which are used to measure the pension liability, fell 10 to 15 basis points during the month, as measured by the Mercer Pension Discount Yield Curve. The yield curve hit an all time low driving the aggregate S&P 1500 liability in excess of $2 trillion for the first time. U.S. equity markets fell 6% during May as measured by the S&P 500 total return index.

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Plan sponsors who hedged their liability by holding a higher allocation in long duration bonds would have seen better asset performance during the month.

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