US Corporate Plans Hit Five-Year High in Funded Ratio

(December 3, 2013) — A typical US corporate pension plans’ funded ratio improved to 93% as of end of November, a record high since October 2008 and up 19% year-to-date, according to Mercer.

The report also found a correlating decline in the total asset shortfall—$138 billion from $185 billion a month ago. This figure was significantly lower than Mercer’s estimated deficit of $557 billion as of December 31, 2012.

Such development was attributed to rising interest rates that helped lower liabilities for pension plans sponsored by S&P 1500 companies, Mercer said. It reported a 15 basis point increase in the corporate discount rate—from 4.45% to 4.59%.

“This potentially opens up opportunities to manage pension risk that may not have been practical a year ago, such as annuity buyouts or cashout offers to participants,” said Jonathan Barry, a partner in Mercer’s retirement business. “We are seeing a lot of plan sponsors get organized now to address the legal, administrative and compliance reviews that are needed so they can move ahead with a pension-risk transfer exercise in 2014.”

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BNY Mellon Investment Strategy & Solutions Group reported similar findings for November, with assets increasing 0.4% and liabilities falling a total of 1.8%.

“Corporate bond yields have resumed their upward march, following a pause in October,” said Jeffrey Saef, managing director at BNY Mellon. These improvements in funded ratio due in part to a higher discount rate has resulted in “more plan sponsors reducing their exposure to market volatility.”

The Mercer report estimated S&P 1500 pension plans’ aggregate assets at $1.84 trillion and liabilities at $1.98 trillion as of November 30, 2013.

Public pension plans, on the other hand, managed to hold steady, BNY Mellon concluded. A typical public defined benefit plan in November failed to surpass its annualized 7.5% return target.

Endowments and foundations experienced some improvements in net returns with plan assets increasing 0.7%, according to BNY Mellon. Their success was found in holdings in hedge funds and private equities.

However, despite good news, T. Rowe Price advised investors to be wary of the bull market next year: “Investors should temper their expectations as the strong performance in many of these markets over the last five years is unlikely to be matched during the next five years.”

(December 3, 2013) — Mark Versey, CIO of insurer Friends Life, has taken on a new role as director of client solutions at Aviva Investors, aiCIO can reveal.

Reporting directly to CEO Euan Munro, the role will see Versey offer CIO support and services to clients of Aviva Investors, the biggest of which is the wider Aviva group.

After initially focussing on delivering the strong investment performance required from the wider Aviva Group businesses, it is understood Versey’s role will then build on this capability to offer an outsourced CIO capability to Aviva Investors’ external clients.

A spokesman for Aviva Investors told aiCIO: “Mark will work closely with our new CEO, Euan Munro, to further strengthen our investment proposition, support our internal clients and grow the business externally, as we embed our focus on investment solutions that deliver income with low volatility.

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“That we have attracted someone of Mark’s calibre to this role is a strong indicator of the positive direction of our business.”

Versey had spent a little more than three years leading the investment charge at Friends Life, and was involved in the insurer setting up its own asset management arm in 2012.

Prior to this, he was CIO for AXA UK, and held various roles at Morgan Stanley, Lehman Brothers, and Deutsche Bank.

In his Friends Life role, Versey oversaw two major pools of assets—the legacy with-profits funds and the annuity business—in addition to the Friends Life Investment asset management arm. The total number of assets he was responsible for was £95 billion.

In 2013, Versey made it onto aiCIO’s Power 100 list for the first time, entering at number 45.

The appointment comes five months after Aviva Investors poached Standard Life Investments’ GARS guru Euan Munro to become its CEO.

It also occurs just days after the asset manager announced it was cutting 6% of its global staff, including a number of senior managers, as part of a restructuring exercise.

Among the approximately 60 staff leaving the firm are the head of credit Mark Wauton and the head of equity solutions Iyad Farah, two sources close to the company told Reuters in November.