Wilshire estimates a 6% increase in the aggregate funded ratio for U.S. state pension plans in the fourth quarter of 2023 and nearly 8% increase for the calendar year.
Santa Monica, Calif., February 1, 2024 – The aggregate funded ratio for U.S. state pension plans increased by an estimated 6.1% during the fourth quarter of 2023 to end the quarter at 81.3%, a 7.7% increase from December 2022, according to Wilshire, a diversified global financial services firm. Wilshire assists in providing a suite of OCIO and advisory services to some of the nation’s largest retirement plans which help fund the retirement of millions of Americans.
The quarterly change in funding resulted from a 9.0% increase in asset value partially offset by a 0.8% increase in liability value. The 6.1% increase in the fourth quarter lifted the aggregate funded ratio by 7.7% over the calendar year 2023.
“The aggregate funded status saw an increase this quarter, primarily due to positive performance across nearly all asset classes during November and December. This was highlighted by the FT Wilshire 5000 Index, which deliver edits best quarterly return since the fourth quarter of 2020,” stated Ned McGuire, Managing Director at Wilshire. “Calendar year 2023 marked a remarkable year for most asset class returns, concluding with this quarter’s ending funded ratio reaching its highest point since the end of the first quarter of 2022,” added Mr. McGuire.
A 12-month review of thefunded ratio follows:
Wilshire’s practice is to collect data on public pension plans from Annual Comprehensive Financial Reports (ACFR) filings as of their fiscal year-end (FYE). All data for fiscal year 2022 is based on the 241 constituents in Wilshire State and City & County pension plans that maintain defined benefit pension plans as of year-end 2022. The estimated monthly funded ratios are based on liabilities, service cost, benefit payments and contributions in line with Wilshire’s 2023 State and City & County funding studies.
The assumed asset allocation is below:
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The FT Wilshire US 5000 Index℠is a broad-based market capitalization-weighted index that aims to capture 100% of the U.S. investible market capitalization.
The MSCI ACWI ex USA Index captures large- and mid-cap representation across developed markets countries (excluding the United States) and emerging markets countries. The index covers approximately 85% of the global equity opportunity set outside the United States.
The Bloomberg U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.
The Bloomberg U.S. High Yield Index measures the USD-denominated, non-investment grade (middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below), fixed-rate corporate bond market. Excludes bonds from issuers with an emerging markets country of risk.
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