US - Public pension schemes saw their funding positions deteriorate significantly in 2008, according to a new report by Wilshire Consulting.
The latest annual study covered 104 city and country retirement systems and estimated the average funding ratio - ratio of assets to liabilities - had declined from 99% in 2007 to 81% in 2008.
Of the 104 plans surveyed, 73 reported actuarial values on or after June 30, 2008, of which the report found the average funding ratio shrank from 96% in 2007 to 78% in 2008.
The assets of these 73 schemes fell by -14% from $248.1bn in 2007 to $214.4bn in 2008, while associated liabilities grew by 6% from $258.9bn to $274.3bn over the same period.
This led to a significant increase in the aggregate shortfall from -$10.8bn in 2007 to -$59.9bn in 2008.
The vast majority (89%) of the 73 retirement systems reported to be underfunded - had less assets than liabilities - in 2008, Wilshire found.
The aggregate funding ratio of these underfunded schemes was 77%.
Wilshire forecasts that the vast majority of city and county retirement systems will not earn long-term returns on their assets that equal or exceed their actuarial interest rate assumptions.
The long-term median return on city and county pension assets estimated by Wilshire is 7.2%, which is 0.8 percentage points below the average actuarial interest rate assumption of 8.0%.
Wilshire said asset allocations varied widely among city and county schemes, but reported that the average allocation to equities - including real estate and private equity - was 63.6%, with the balance invested in fixed income.
The equity exposure was slightly higher than the 63.0% reported five years prior in 2003.
Thirty of the 104 schemes surveyed held at least 70% of assets in equities and other non-fixed income assets, such as private equity and real estate, while eight schemes held less than 50%.
This week's edition of Professional Pensions is out now.
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