US. Corporate Pension Risk Minimization Is Going to Become Increasingly Inefficient, Says JPM Strategist
Corporate pensions are better funded than ever, according to a new study released by JP Morgan. The data shows that the top 100 corporate pensions in the United States have finally surpassed the average funded levels achieved pre-2008. The average top-100 corporate plan today is 96.4% funded. Currently, over 70% of the plans studied were at their highest-funded levels ever since the Great Recession.
But the strategies that work for bridging a funding gap are not necessarily appropriate for better funded plans, says Jared Gross, co-author (with Michael Buchenholz) of the study and head of institutional portfolio strategy at JP Morgan.
“We’ve been in an era of gradual but persistent de-risking for the better part of the last 12 to 15 years,” says Gross. “But now that we’ve arrived at a level of funding that gives people more flexibility, it’s useful to step back and consider just how far they should go.”
Gross says that while the old models of asset allocation based on total return maximization did not work, newer models that focus heavily on liability-driven investing are also inefficient.
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