Funded Status Volatility: Why It Matters For Pension Plans

Providing options to clients: Repurposing reduced funded status volatility

In addition, recognizing that each client is unique, the significant reduction in volatility of funded status movements could be repurposed to provide more options for plans that desire higher returns. Institutional investors could alternatively spend that risk in other areas to seek higher expected returns, where appropriate.

The bottom line

We believe the holy grail of risk management for institutional investors is to provide the smoothest funded status experience possible while simultaneously progressing funded ratios towards desired outcomes. We also believe recent data shows that—with the right holistic approach to risk management—this is not only possible, it’s been done. Even during the roller coaster ride of 2020

*S&P 1500 industry data based on monthly funded status estimates published by Mercer.

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