Wilshire Consulting Report Shows Retirement System Funding Levels Increased in Cities and Counties in Fiscal Year 2017
SANTA MONICA, Calif.--(BUSINESS WIRE)--Sep 18, 2018--Wilshire Consulting, the institutional investment advisory and outsourced-CIO business unit of Wilshire Associates Incorporated (Wilshire®), a diversified global financial services firm, announced today that it estimates the funding ratio for the city and county pension plans it studied was 71 percent in fiscal 2017, up from 67 percent in fiscal year 2016, reversing two consecutive years of declines.
The is based upon data gathered by Wilshire from the most recent financial and actuarial reports available and includes 107 city and county retirement systems. Of these 107 systems, 96 systems reported actuarial values on or after June 30, 2017. This is Wilshire Consulting’s sixteenth report on the financial condition of city and county sponsored defined benefit retirement systems.
“The increase in global equity values for the twelve-month period ending June 30, 2017 was a primary driver of the improved funding levels. Robust investment returns and contributions also drove asset values higher for the year,” noted Ned McGuire, Managing Director and a member of the Pension Risk Solutions Group of Wilshire Consulting. “With that, we found that 93 percent of the plans in this year’s study have market value of assets less than pension liabilities or are underfunded.”
Aggregate pension liabilities grew by 4 percent, from $697.3 billion in 2016 to $725.4 billion in 2017. Despite the increase in aggregate liabilities, pension plans saw a decrease in aggregate shortfall by $22.7 billion, from $233.3 to $210.6 billion. This decline in the aggregate shortfall is the result of the significant increase in aggregate assets by over 10 percent, from $464.0 billion in 2016 to $514.8 billion in 2017. The estimated aggregate value is the highest since Wilshire began reporting on City and County-sponsored retirement system funding levels.
“Discount rates have trended lower over the past several years and continued for this year’s study as nearly half of the plans lowered their discount rate,” McGuire added. “The range for discount rates this year is 5.13 percent to 8.50 percent with a median of 7.25 percent, which is down 25 basis points from last year.”
On average, city and county pension portfolios have a 64.3 percent allocation to equities, including real estate and private equity, a 24.7 percent allocation to fixed income, and a 11 percent allocation to other assets. This equity allocation is somewhat lower than the 65.9 percent equity allocation a decade prior in 2007.
About Wilshire Consulting
Through its investment consulting services to public and corporate clients, Wilshire Consulting assists in ensuring secure and safe retirements for millions of Americans including those participating in some of the nation’s largest public and corporate retirement plans. Combined with its endowment, foundation and major insurance company clients, it consults on combined total assets of nearly $1 trillion.
As the institutional investment advisory and outsourced-CIO (OCIO) business unit of Wilshire Associates, Wilshire Consulting has provided custom investment consulting solutions to plan sponsors for 35 years. Wilshire consultants provide strategic advice on critical strategic advice including asset allocation, risk management, investment policy development, asset class structuring, investment manager evaluation and monitoring, and actuarial services.
Wilshire Consulting’s outsourced chief investment officer practice (OCIO), offers clients a holistic option that is built on our culture of risk management and our expertise in all areas of investment strategy. Wilshire Consulting’s customized OCIO services include full discretionary services or implemented services where plans outsource their back office.
Built on Wilshire Associates’ foundation in investment analytics, Wilshire Consulting offers clients access to and use of innovative and proprietary risk management consulting, which provides us a meaningful competitive advantage. Consulting clients can benefit from ex-ante, forwarding looking risk analysis at the manager, asset class and total fund levels. Wilshire’s global footprint and firm wide expertise in hedge funds, alternative risk premia and private markets allows our clients to effectively consider adding, expanding or modifying an alternatives investment program. Follow Wilshire Consulting on Twitter: @WilshireConsult.
About Wilshire Associates
Wilshire Associates, a leading global financial services firm, provides consulting services, analytics solutions and customized investment solutions to plan sponsors, investment managers and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets. The firm was founded in 1972, providing revolutionary technology and acting as an early innovator in the application of investment analytics and research to investment managers in the institutional marketplace. Wilshire also is credited with helping to develop the field of quantitative investment analysis that uses mathematical tools to analyze market risks. All other business units evolved from Wilshire’s strong analytics foundation. Wilshire developed the Wilshire 5000 Total Market Index and became an early innovator in creating integrated asset/liability analysis/simulation models as well as practical models in risk budgeting through beta and active risk analysis. Wilshire has grown to a firm of approximately 300 employees serving the needs of investors around the world. Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately US $8 trillion.* With ten offices worldwide, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality counsel, products and services. Wilshire® and Wilshire 5000® are registered service marks of Wilshire Associates Incorporated. Wilshire 5000 Total Market Index℠ is a service mark of Wilshire Associates Incorporated.
Please visit www.wilshire.com Twitter: @WilshireAssoc
*Client assets are as represented by Pensions & Investments (P&I), detailed in P&I’s “Largest Retirement Funds” and P&I’s “Largest Money Managers (U.S. institutional tax-exempt assets)” as of 9/30/17 and 12/31/17, and published 2/5/18 and 5/28/18, respectively.
The data in this release are copyrighted and owned by Wilshire Associates Incorporated.
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CONTACT: Prosek Partners
KEYWORD: UNITED STATES NORTH AMERICA CALIFORNIA
INDUSTRY KEYWORD: PROFESSIONAL SERVICES FINANCE
SOURCE: Wilshire Consulting
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PUB: 09/18/2018 09:01 AM/DISC: 09/18/2018 09:01 AM