Despite positive performance from “risky asset markets,” the typical U.S. corporate pension plan saw its funding ratio drop by 1% thanks to the drowning effects of high rising liabilities, a new study claims.

In a Friday analysis, UBS Global Asset Management (UBS GAM) said in its quarterly study “U.S. Pension Fund Fitness Tracker” that a 5% increase in assets, which were derived from a good September performance, was cancelled out by the more than 6% increase in liabilities.

The tracker is a ratio of the asset index over the liability index, which “measures the impact of a typical investment strategy on the funding ratio of a model defined benefit plan in the U.S. due to interest rollup, change in interest rates and typical asset performance,” the Oct. 8 announcement said.

In its explanation, UBS Global Asset Management lists that liability levels increased “due to a strong rally in interest rates combined with a slight narrowing of credit spreads,” which in turn “led to a lower corporate bond yield curve and pension discount rate.”

With regards to investments, UBS’s money management arm explained that the S&P 500 index finished up about 11%, with “equity markets [being] traded in a wide and volatile range throughout the quarter,” the release stated.

The Zurich and Basel-based financial services firm’s division also states the plan sponsors should “explicitly” watch four key drivers of funding ratio risk in order to keep a hold on the problem. They include market, interest rate, credit spread, and active management risk, the report explained. 

Previously, in April, UBS GAM reported that plan assets saw an increase of 2.5%, along with a 1.5% increase for liabilities. This marked a slight improvement for the first quarter.

Currently, UBS GAM offers equity, fixed-income, currency, hedge fund, real estate and infrastructure investment offerings to its clients. Invested assets totaled $528 billion as of June 30, the release said.

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