Sibson, Segal Marco Model Pension Funding Status Rises to 93%

Increasing high-quality corporate yields help reduce pension liabilities.

The funded status of the model pension plan tracked by Sibson Consulting and Segal Marco Advisors rose two percentage points to 93% during the second quarter of the year. The firms attributed the result to a flat asset return combined with a 3% decrease in liabilities, which was due to an increase in high-quality corporate yields.

Returns for equity asset classes were mixed during the quarter, while global bonds performed poorly, according to Sibson and Segal Marco. Domestic stocks were the model pension plan’s top-performing asset class, recording positive returns each month of the quarter. US stocks outperformed both developed international stocks and emerging market stocks, as international stock sectors took a hit during the quarter because of the appreciating US dollar.

“Domestic stocks were the lone bright spot,” David Palmerino, vice president at Segal Marco Advisors, said in a release. “FOMC increased the target range for the Federal Funds Rate to 2%, its second increase this year, but the move was largely telegraphed and had no dramatic impact on bond prices.”

Among US stocks, small cap equities outperformed large caps during the quarter, while growth outpaced value for a sixth straight quarter. Fixed-income returns were split by geography as domestic bonds were modestly positive. Although the Federal Reserve increased the target range for the Federal Funds Rate to 1.75% to 2.00% there was no noticeable effect on domestic bond prices. International bonds, however, fell behind mainly because of a strengthening dollar. For the model plan, Sibson and Segal Marco said these aspects of investment performance contributed to the 0.05% gain in asset value during the quarter.

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There was also a 3% decrease in the model pension plan’s liability due to a rise in yield-curve levels. The firms said that any change in the shape of the yield curve could have a dissimilar impact on liabilities for plans with different maturities. Yield increases were relatively consistent across maturities during the quarter, causing the overall shape to remain similar to the previous quarter, which the companies described as an upward sloping yield curve that peaks around 20 years and then levels off.

Yale Blocks Future Gun Investments

Endowment confirms adoption of new firearm policy, introduced in the spring.

Yale University’s endowment has barred investments in retailers that sell firearms to the public.

The $27.2 billion endowment’s advisory committee on investor responsibility recommended the ban to a group of board trustees in the spring. The group had recently adopted the policy, with the Connecticut college acknowledging the change in an August 21 statement.

“The loss of life resulting from mass shootings in our country is deeply tragic,” the statement read. “The ACIR [Advisory Committee on Investor Responsibility], which advises the Yale Corporation Committee on Investor Responsibility (CCIR), determined that mass shootings cause incontrovertible societal harm and retailers supplying assault weapons to the general public cause grave social injury, a conclusion supported by the CCIR.”

The policy applies to public retail distributors, promoters, and dealers who organize and sell firearms at gun shows.

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This comes at a time where institutional investors, such as the Connecticut Treasury ($42.3 billion), the New Jersey State Investment Council ($78.6 billion), and the California State Teachers Retirement System ($228 billion) are or are considering cutting gun and gun-related holdings from their portfolios amid a number of shootings that have occurred throughout the year, starting with the Stoneman Douglas High School shooting in Parkland, Florida, in February.

Such retailers the institutions have been boycotting include Kroger, Walmart, and Vista, who have since dropped guns from their inventory.

While creating the policy, the Yale Corporation Committee gave “special consideration” to several factors, including the differences in manufacturers and retail distributors, considering the military and law enforcement-only gunmakers and issuers; as well as the number of shootings that have occurred at educational facilities.

Jonathan Macey, the committee’s chairman and Yale law professor, told Bloomberg he doesn’t think the endowment has any holdings in retailers that sell assault-weapons.  

Yale was unable to provide comment by deadline.

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