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The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
AS PART OF THEIR YEAR-END REPORTING PROCESS, US corporate and public defined benefit (DB) plan sponsors must set an assumption for the long-term expected return on assets, or ROA. To help sponsors make more informed decisions, we provide this annual update on ROA assumptions, including our latest trend analysis and long-term capital market assumptions.
Corporate sponsors use the ROA assumption to determine the pension expense recognized on their income statements. Under US accounting standards, the pension expense includes a credit (income) equal to the plan’s expected return on assets during the fiscal year.
The average ROA assumption reported by S&P 500 companies at year-end 2020 was 6.0%, about 30 basis points (bps) lower than in 2019 (see Figure 1 in PDF available below). This continues a downward trend. The average assumption has fallen 210 bps since 2006, when the introduction of mark-to-market balance sheet accounting for pension plans by the Financial Accounting Standards Board (FASB) and the passage of the Pension Protection Act by Congress first prompted many plan sponsors to reevaluate their investment…
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Past performance is no guarantee of future performance and can be misleading. Funds returns are shown net of fees.
Source: Wellington Management
Investment in the funds described on this website carries a substantial degree of risk and places an investor’s capital at risk. The price and value of investments is not guaranteed and can go down as well as up. An investor may not get back the original amount invested and an investor may lose all of their investment. Investment in the funds described on this website is not suitable for all investors. If an investor is in any doubt as to the suitability of an investment in a fund, an investor should consult an independent financial advisor. The information on this website does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in any security including, but not limited to, shares in the funds. An investor should only invest in a fund once that investor has carefully read and understood the offering documents for the relevant fund, which are the relevant prospectus, and Key Investor Information which contain further information on the risks and features of the fund, and the latest financial reports and any other offering documents for the fund which are available on this Website. Unless stated otherwise data is as at previous month end.