Financial Economics and Corporate Strategy: How do pension funds fit within the broader context of the corporations that sponsor them? October 2007 Michael Hall Director, Investment Strategy Michael Hall's Viewpoint, "How do pension plans fit within the broader context of the corporations that sponsor them?" is based on his recent study of the 562 corporations in the Russell 1000® Index as of 2006 that have pension plans. It provides important insights for Defined Benefit plan sponsors to help them better understand their plans' real exposures compared to competitors and broader peer groups. Among the results shown:   the median unfunded projected benefit obligation of the 562 corporations is only 1% of the corporation's market capitalization... but there are 23 corporations with unfunded liabilities of $1 billion or more. for this group of 23, the unfunded projected benefit obligation is on average no less than 16% of the whole corporation's total market capitalization. the extent to which a 1% sudden drop in interest rates would increase pension liabilities and hence impact the corporate balance sheet is similarly varied: while the median corporation would see little impact on the corporate balance sheet, for 5% of corporations the impact would be 7% or greater of their total market capitalization. further analysis of specific corporations that lie in the tails of these distributions provides insight into why a number of corporations have been aggressively pursuing LDI-type strategies, and why others have less urgency to act. Request this Research A note about our research Our proprietary research is made available to our institutional clients, and many of these published papers are available to other institutional investors as well. If you are not a Russell client, but are an institutional investor, we welcome you to request this research piece. We only require your contact information on a short request form. For more information about our research, please contact Bill or Gerry:   West Coast   East Coast Rob Ciro Director 866-926-5934 Gerry Lillis Director 866-459-4128 Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. USIRC 4136			Related Information Request this Research Defined Benefit   Contact Details West Coast contact Rob Ciro Director 866-926-5934 East Coast contact Gerry Lillis Director 866-459-4128 Printer friendly version of this page