2024 investment themes for U.S. corporate pensions

Marty: In 2023, investors grappled with the aftermath of a challenging 2022 with a number of persistent macro issues, particularly tighter monetary policy and geopolitical tensions, causing wide market swings.

Liz: Despite volatile asset values, the funded ratios of U.S. corporate pension plans showed sustained improvement over the year, rising approximately 5% as of 30 November 2023, according to the BlackRock U.S. LDI Pension MarketWatch.

This improvement was largely attributable to a tech-dominated equity market rally contributing to asset growth. The average funded ratio for the top 200 U.S. Corporate pension plan is now 105%¹. An increasing number of plans are evolving their conversations away from finding ways to achieve full funding, and instead towards investing to preserve strong funded ratios and planning optimal ways to use a surplus.

Angela: Continued labor market tightness makes it important for U.S. corporations to find cost effective ways to retain employees and improve recruitment. As we advocated in last years’ Themes, offering a pension plan with richer benefits could potentially serve as a solution. Recently, we learned that IBM has decided to reopen its pension plan as a way to use its pension surplus, and a handful of others we are aware of have chosen to improve benefits. The corporate DB plan may not be ‘dead’ after all!

Marty: In this sixth annual publication of our U.S. Corporate Pension Themes paper, we are advocating sponsors to follow in IBM’s footsteps and reopen the plan (!) as one way to use a surplus. We discuss the potential investment implications of this decision. Other themes covered in this years’ publication include:

Marty: As a fiduciary to our clients, we at BlackRock aim to offer concrete advice that can help pensions preserve their healthy financial positions, and ultimately, improve retirement security for their workers.