Companies Moving To Corporate Bonds For Pension Portfolios

In a move to eliminate uncertainty for shareholders caused by underfunded pensions, companies have started moving pension funds from stocks to investment-grade bonds. Pension funds are increasing allocations of investment- grade debt to the highest level since the 1970s.

J.C. Penney (NYSE: JCP), General Motors and Goodrich (NYSE: GR) are among those making this move. J.C. Penney is gradually boosting bonds to 100 percent of pension investments from 20 percent as federal requirements to plug pension gaps. J .C. Penney is aiming for a 75 percent fixed-income allocation by 2014 to 2017, depending on how quickly the stock market recovers from the recession, according to the company.

According to JPMorgan (NYSE: JPM), fixed-income holdings will rise 10 percent in the next few years, or about $40 billion of corporate debt. The new money is flowing into investment-grade bonds, which may be overheating after returning 21 percent this year, according to Cabot Money Management.