Articles | January 25, 2023

Role of Q4 2022 Investment Performance in Rise of Model Pension Plan’s Funded Status

During the fourth quarter (Q4) of 2022, an increase in assets for the model pension plan examined in each issue of Prism drove a rise in the plan’s funded status.

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Market dynamics contributed to the model plan’s rise in asset value

Equity and fixed income returns were positive during Q4, closing out a historic calendar year in investment markets that saw both domestic equities and domestic bonds post negative returns simultaneously for the first time in at least five decades.

Developed international and emerging market equities both performed well in Q4 and outperformed U.S. equities as China relaxed its zero-COVID-19 policy and began to reopen. A weakening U.S. dollar during the quarter provided a further tailwind for international markets.

Fixed income returns were positive in Q4 both domestically and internationally following three consecutive negative quarters.

How the plan’s funded status changed

The model plan’s funded status rose by 2 percentage points, to 106 percent, as illustrated in the graph below.

This increase in funded status is primarily attributable to a 7 percent increase in assets, partially offset by a 4 percent increase in liabilities.

Change in Assets, Liabilities and Funded Ratio

 


Change in Assets, Liabilities and Funded Ratio graph

 


Source: Prism Review of Fourth Quarter 2022

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The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This article and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. On all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.

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