{"id":40146,"date":"2015-02-16T00:08:49","date_gmt":"2015-02-15T23:08:49","guid":{"rendered":"http:\/\/beta.next-finance.net\/note\/global-pension-fund-assets-reach-new-highs\/"},"modified":"2015-02-16T00:08:49","modified_gmt":"2015-02-15T23:08:49","slug":"global-pension-fund-assets-reach-new-highs","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/note\/global-pension-fund-assets-reach-new-highs\/","title":{"rendered":"Global pension fund assets reach new highs"},"content":{"rendered":"

The
\ngrowth is the continuation of a trend which started in 2009 when assets grew 18%, and in sharp
\ncontrast to a 22% fall during 2008 when assets fell to around US$20 trillion. Global pension fund
\nassets have now grown at 6% on average per annum (in USD) since 2004.<\/p>\n

The research shows that defined contribution (DC) assets grew rapidly for the ten-year period to
\n2014, with a compound annual growth rate (CAGR) of 7%, against a rate of over 4% for defined
\nbenefit (DB) assets. As a result DC pension assets have grown from 38% of all pensions assets in
\n2004 to 47% in 2014 and are expected to overtake DB assets in the next few years. <\/strong> <\/em><\/p>\n

Thierry de la Noue, Senior Investment Consultant at Towers Watson France, said: \u201cThe inexorable shift to
\nDC, which we believe will soon constitute the majority of global pension fund assets, means it is
\nbecoming the dominant global pensions model. This brings with it the transfer of risk and a new tension in
\nthe balance of ownership and control, which will test governments and pension industries around the
\nworld. These billions of new pension members have high and immediate expectations in a world of low
\nreturns and in many cases where the benefits of pooling are not fully exploited. This pressure is likely to
\naccelerate the emergence of a more effective \u201cvalue chain\u201d, where expense on various activities has a
\nbetter value proposition than exists today. The use of passive approaches and smart betas in DC will lead
\nto fee compression. So far that that fee compression has been small but over time it is likely to be a large
\ndisruptive force.\u201d<\/em><\/p>\n

According to the study, pension assets now amount to around 84% of global Gross Domestic Product
\n(GDP), substantially higher than the 54% recorded in 2008. <\/p>\n

Thierry de la Noue said: \u201cWhile there has been a significant improvement in various pension balance
\nsheets around the world since the financial crisis, many DB pension funds are still in very weak solvency
\npositions. With global pension assets at only 84% of global GDP, the pensions industry gets quite poor
\nmarks for providing good value for the worker and pensioner populations. The acid test for national
\npension systems should be to get assets to at least 150% of GDP. If that were combined with an improving recognition of good governance as a return driver and sustainable investing as genuinely value
\nadding, it would put the pensions world in much better shape.\u201d<\/em><\/p>\n

According to the research, there is a clear sign of reduced home bias in equities, as the weight of
\ndomestic equities in pension portfolios fell, on average, from 65% in 1998 to 43% in 2014. During the past
\nten years US pension plans have maintained the highest bias to domestic equities (67% in 2014), having
\nalso increased domestic equity bias during the past three years. Canadian and Swiss funds remain the
\nmarkets with the lowest allocation to domestic equities (33% and 34% respectively in 2014) while UK
\nexposure to domestic equities has more than halved, to 36%, since 1998. The research shows Canadian
\nand US funds have retained a very strong home bias in fixed income investment since the research
\nbegan (98% and 91% respectively in 2014), while Australian and Swiss funds have reduced exposure to
\ndomestic bonds significantly since 1998: down by 31% and 17% respectively during this period.<\/p>\n

According to the research allocations to alternative assets – especially real estate and to a lesser extent
\nhedge funds, private equity and commodities – in the larger markets have grown from 5% to 25% since
\n1995. In the past decade most countries have increased their exposure to alternative assets with
\nAustralia increasing them the most (from 10% to 26%), followed by the US (16% to 29%), Switzerland
\n(16% to 28%), Canada (13% to 22%) and the UK (from 7% to 15%). <\/p>\n

Thierry de la Noue said: \u201cThis shift away from domestic equities is one indication of an increased focus on
\nrisk management and there are others such as diversification of assets in portfolios, which is also
\nincreasing. However from working with an increasing number of CIOs at pension funds, this focus on risk
\nis producing two very different groups: those where the appetite for risk is being trimmed and those
\nneeding more risk to get them out of their deficit. As a result, the pensions world has to be considered at
\nan increasingly contextual level to understand its present state and make projections about its future.\u201d<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Global institutional pension fund assets in the 16 major
\nmarkets grew by over 6% during 2014 (compared to around 10% in 2013) to reach a new high of
\nUS$36 trillion, according to Towers Watson\u2019s Global Pension Assets Study released today. <\/p>\n","protected":false},"author":20,"featured_media":40144,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1481],"tags":[1655,1651,1437,1724,2091,2016],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/40146"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=40146"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/40146\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/40144"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=40146"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=40146"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=40146"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}