Funded Status Volatility: Why It Matters For Pension Plans

Russell Investments' OCIO success:
Client funded status experience vs. S&P 1500 industry

5 years ended December 31, 2020

Monthly changes in funded status versus industry - December 31, 2020

Source: Russell Investments

From 2015 to 2020, the volatility of funded status movements for Russell Investments’ DB OCIO clients was 4.5%. Over the same time period, the estimated volatility of funded status movements for DB plans sponsored by S&P 1500 companies was 7.4%*. That represents an approximate 40% reduction in the volatility of funded status movements for Russell Investments’ DB OCIO clients.

When it comes to funded status movements, the data shows that the monthly path for our DB clients has been significantly smoother than what was typical in the industry. This more predictable experience was especially noteworthy amid the market upheaval of 2020. As a result of our approach, the data shows that the volatility of funded status movements for Russell Investments’ clients was only 5.3% in 2020, in contrast to the S&P 1500 industry estimate of 9.7%.

Russell Investments' OCIO success:
Client funded status experience vs. S&P 1500 industry

As of December 31, 2020

  Funded status change Volatility of funded status change
(annualized)
  Client 
experience
S&P 1500
industry
Client
experience
S&P 1500
industry
1 year 0.1% -4.0% 5.3% 9.7%
3 years -0.1% 0.0% 5.1% 8.8%
5 years 3.5% 2.0% 4.5% 7.4%

Source: Russell Investments

Was there a tradeoff in the actual funded status of these plans? Not according to the data. On average, the funded status of these client plans improved 3.5% from 2015 to 2020—an improvement above the S&P 1500 industry estimate of 2.0% during this same time frame. While 2020 saw liabilities often increasing due to the dramatic drop in discount rates, the average DB plan managed by Russell Investments maintained its funded status—while the estimated funded status industry-wide fell by 4.0%.

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Disclaimer: Opinions expressed by readers don’t necessarily represent Russell’s views. Links to external web sites may contain information concerning investments other than those offered ...

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