Global institutional pension fund assets in the 13 major markets increased by 12% during 2010 to reach a new high of US$ 26 trillion according to Towers Watson’s Global Pension Assets Study released today. The growth is the continuation of a trend which started in 2009 when assets grew 17%, but in sharp contrast to a 21% fall during 2008 which took assets back to 2006 levels. Global pension fund assets have grown 66% since 2000, when they were valued at US$16 trillion.
The study also reveals that pension fund balance sheets* globally continued to strengthen during 2010, although the global asset/liability ratio is still well down from its 1998 level. According to the study, pension assets now amount to 76% of the global GDP (71% in 2009), substantially higher than the equivalent figure of 61% in 2008.
Carl Hess, global head of investment at Towers Watson, said: “The global financial crisis is still with us and the ongoing aftershocks are a continual reminder that the nascent economic recovery is still very tenuous. While nervousness about the volatility of markets and extreme events is just below the surface, there is broad acceptance that this is the new normal and that investors will need investment strategies that are more flexible and adaptable than they have been in the past. So while the recovery of the markets is to be welcomed, it should not distract from the major issues confronting the industry and the weaknesses in the system which governments and companies must face up to.”
Other highlights from the report include:Global asset data for the P13*
On average global pension assets (measured in local currency) grew by over 9% in 2010, taking the ten-year average growth rate to almost 6%*
The US, Japan and the UK remain the largest pension markets in the world, accounting for 58%, 13% and 9% respectively of total pension fund assets globally*
All markets saw growth in pension assets in 2010 (measured in local currency), and all markets in the study have positive ten-year compound annual growth rate (CAGR) figures*
In terms of ten-year CAGR figures (in local currency terms), Brazil has the highest growth of 15% followed by South Africa (13%), Hong Kong (11%) and Australia (10%). The lowest are Japan (0.2%), Canada (1%), France (1%) and Switzerland (2%)*
The Netherlands now has the largest proportion of pension assets to GDP (134%), followed by Switzerland (126%), US (104%), Australia (103%) and the UK (101%). In the past ten years Canada, Ireland and France have seen the greatest fall in the ratio of pension assets to GDP of -19%, -3% and -1% respectively.
Asset Allocation for the P7*
Bond allocations for the P7 markets have decreased by 7% in aggregate during the past 15 years (40% to 33%), while allocations to equities have fallen by 2% (to 47%) during the same period*
Other assets, especially real estate and to a lesser extent hedge funds, private equity and commodities, have grown from 5% to 19% since 1995*
Equity allocations in the UK have fallen from 74% in 2000 to 55% in 2010; similarly in the US allocations have fallen from 64% to 49% during the same period*
Australia, Canada and the US have increased their proportion of alternative assets the most from nearly 8% in 2000 to more than 20% in 2010. Conversely, during the past decade, allocations to alternatives have remained relatively constant in Switzerland (29%), the UK (7%) and Japan (4%)
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