Global institutional pension fund assets in the 13 major markets increased by 15% during 2009, from US$20 trillion to over US$23 trillion, according to Towers Watson’s Global Pension Assets Study. The growth is in sharp contrast to a 21% fall in asset values during 2008 and brought assets back to 2006 levels. The study also reveals that the global pensions balance sheet measured by asset values over liability values using sovereign bonds to discount liabilities strengthened by around 10% in 2009, compared to a 25% fall in 2008. According to the study, pension assets now amount to 70% of the average global GDP, down from 76% a decade earlier, but substantially higher than the equivalent figure in 2008 of 58%.
“The global financial crisis was a huge wake-up call and problems of poor systemic design in the industry point to increased likelihoods of further periods of financial distress in future, says Roger Urwin, global head of investment content at Towers Watson. While the recovery of markets will be welcomed, it is hoped that it will not stifle recognition of these as major issues for governments and companies to address. I fear that without exceptional leadership we will have another tough decade in the pension and investment world.”
Other highlights from the report include:
Global asset data for the P13
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On average global pension assets (measured in local currency) grew by over 16% in 2009, compared with an 11% fall in 2008, improving the ten-year average growth rate to almost 7%*
Despite losing market share in the past ten years, the US, Japan and the UK remained the largest pension markets in the world, accounting for 57%, 14% and 8% respectively of total pension global fund assets*
All countries saw significant growth in pension assets in 2009 (measured in local currency), contributing to a positive growth rate over the last five years. The exception is Japan, where the growth in 2009 was not sufficient to provide positive growth over the last five years*
In terms of ten-year CAGR (in local currency terms), these are mostly positive,with Brazil (18%), Hong Kong (14%), the Netherlands (12%) and Australia (10%) having the highest and Japan (1%), Switzerland (2%), US (3%) and the UK (3%) having the lowest*
The Netherlands now has the largest proportion of pension assets to GDP (120%), followed by Switzerland (113%) and Australia (93%).
Asset Allocation for the P7
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Bond allocations for the P7 countries increased from 25% in 2005 to 32% in 2008, but fell back to 27% in 2009. Allocation to equities rose significantly during 2009 to reach 54%*
Other assets, especially real estate and to a lesser extent hedge funds, private equity and commodities, have grown from 12% to 17% in the last five years.
Defined Benefit (DB) vs. Defined Contribution (DC) for the P7
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During the ten-year period from 1999 to 2009, the CAGR of DC assets was 6% against a rate of 2% for DB assets*
DC assets now comprise 42% of global pension assets compared with 32% in 1999*
Australia has the highest proportion of DC pension assets, having increased them from 78% to 82% of overall assets between 1999 and 2009*
The countries that show a larger proportion of DC assets than DB assets are the US, Australia and Switzerland while Japan and Canada are close to 100% DB.
D.C.