Funding ratios for the largest public pension plans in the US rebounded significantly in April after suffering the largest quarterly drop recorded by the 100 Public Pension Funding index.
Funding for public plans experienced an aggregate 5.92% investment return for the month after the first quarter’s -10.81% return. April’s market gains led to a $200 billion funding improvement for the PPFI, allowing public plans to recover half of their losses from the previous two months when most of the quarter’s losses occurred.
The aggregate deficit shrank to an estimated $1.619 trillion as of April 30 from $1.819 trillion as of March 31. The resulting funding ratio climbed significantly, to 69.8% as of April 30 from 66.0% at the end of March.
April was a surprisingly positive month for public pensions, with many sectors of the market showing some signs of recovery. As economic fallout continues from the COVID-19 pandemic, plan sponsors will likely be keeping an eye on asset classes with delayed performance reporting, such as private equity, and market sectors that may be more vulnerable as the economy restarts.