NEW YORK, January 31, 2013- Global institutional pension fund assets in the 13 major markets grew by 9% during 2012 to reach a new high of US$30 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%, and in sharp contrast to a 21% fall during 2008 which took assets back to 2006 levels. Global pension fund assets have now grown at over 7% on average per annum (in USD) since 2002, when they were under half their current level. In the United States, institutional pension fund assets hit an all-time high of $16.9 trillion in 2012, having increased 10% during the year.
The study reveals that the growth in assets helped to strengthen pension fund balance sheets globally during 2012. Furthermore, the ratio of global assets to GDP is just below the level reached in 2007. According to the study, pension assets now amount to 78% of global GDP, which is significantly higher than the 72% recorded in 2011 and substantially higher than the 61% recorded in 2008.
“Given the extreme economic and market volatility we have experienced during the past five years it was a relief for many pension funds to finish the year in better shape than when it started, for a change,” said Carl Hess, global head of investment at Towers Watson. “While volatile markets are expected to continue for the foreseeable future, pension funds are now generally better equipped to deal with them. During the past five years we have seen many funds deal with their governance shortfalls and as a result a growing number of funds have either more qualified people working on their investments or they have outsourced the running of all or part of their portfolios to third parties. In addition, pension funds are implementing investment strategies that are more flexible and adaptable and which contain a broader view of risk so as to make greater allowance for extreme events.”
Other highlights from the report include:
Global asset data for the P13 in 2012
· The ten-year average growth rate of global pension assets (in local currency) is over 8%
· The largest pension markets are the US, Japan and the UK with 57%, 13% and 9% of total pension assets, respectively
· All markets in the study have positive ten-year compound annual growth rate (CAGR) figures (in local currency)
· In terms of ten-year CAGR figures (in local currency terms), Hong Kong and Brazil have the highest growth of 14% followed by South Africa (13%) and Australia (11%). The lowest are Japan
(2%), France (2%) and Switzerland (4%)
· Ten-year figures (in local currency) show the UK and Netherlands have both grown their pension assets the most as a proportion of GDP by 42% to reach 112% and 156% of GDP respectively, followed by Australia (up 32% to 101% of GDP), the US (by 24% to 108% of GDP) and Hong Kong (up 23% to 40% of GDP).
· During this time South Africa’s ratio of pension assets to GDP has fallen by 2% to 64% of GDP.
Asset Allocation for the P7
· Bond allocations for the P7 markets have decreased by 7% in aggregate during the past 18 years (40% to 33%). Allocations to equities have fallen by 2% (to 47%) during the same period.
· Equity allocations in the UK have fallen from 61% in 2002 to 45% in 2012. In the Netherlands allocations fell from 37% to 27%, during the same period while Canada’s allocation to equities fell from 51% to 43%. Australia maintains the highest allocation to equities at 54% followed by the US on 52%, while the Netherlands overtakes Japan (55%) as having the highest allocation to bonds of 57%.