Article November 8, 2021

US pension briefing – October 2021

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Key takeaways

  • Pension discount rates were down from the previous month-end.
  • Asset returns for both US and international equities were positive (7% and 2%, respectively). Fixed income assets stayed stable during the month.
  • Funded status improved across pension plans as higher equity returns offset lower discount rates.

October 2021 summary

October brought a decrease in pension discount rates. On the asset side, US equities performed well during the month (S&P up 7%); International equities also increased slightly (up 2%). Fixed income assets stayed stable with almost 0% return for the month.

Pension plans will generally see their funded status improve as higher liabilities are offset by stronger equity returns.

Discount rates & asset returns

FTSE pension discount rate index last 12 months

After a couple of months of increases, discount rates decreased by 0.11% in October back to about where they were in August. Current discount rates are still up 0.25% since the end of 2020 and are essentially where they were at this time last year. The FTSE pension discount index finished October at 2.77%.

October returns (%)

Global equities regained momentum over the month, led by US stocks which were supported by strong quarterly earnings. International and Emerging Markets also rebounded. On the fixed income side, the yield curve flattened slightly as long-term treasuries yielded lower while the shorter-dated treasury yields increased. The US Aggregate bond index and high yield bonds slightly declined while long term bonds posted positive returns. Credit spreads saw little change. Gold finished the month higher while the US Dollar was flat for the month.

 

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SECURITY INDICES: This presentation includes data related to the performance of various securities indices.  The performance of securities indices is not subject to fees and expenses associated.  Investments cannot be made directly in the indices.   The information provided herein has been obtained from sources which River and Mercantile LLC believes to be reasonably reliable but cannot guarantee its accuracy or completeness.
CONFIDENTIAL:  For addressee use only, not to be disclosed to any other person without express consent from River and Mercantile LLC.  Past performance cannot be relied upon to predict future results.  River and Mercantile LLC is an investment advisor registered with the US Securities and Exchange Commission.

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