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The Actuary The magazine of the Institute & Faculty of Actuaries

Global pension assets grow 15%

Institutional pension fund assets in the world’s 22 largest markets soared by 15% to $46.7trn (£36.1trn) last year, research by the Thinking Ahead Institute has found.

Pension assets soar ©Shutterstock
Pension assets soar ©Shutterstock

This represents a significant swing in fortunes from 2018 when there was a decline of 3.3% in global pension assets, with the recovery driven by strong gains in equity markets.

The seven largest countries for pensions assets – Australia, Canada, Japan, the Netherlands, Switzerland, the UK and US – account for 92% of all assets, slightly higher than in 2018.

The US remains the largest pension market, representing 62% of worldwide assets, followed by the UK and Japan on 7.4% and 7.2% respectively.

Marisa Hall, co-head of the Thinking Ahead Institute, said there was also a “noticeable pick up” in the decade-long trend of funds developing stronger strategies around their people.

“Larger funds, particularly those above $25bn, continued to build larger and more sophisticated internal teams, with stronger leadership through CEO and CIO roles and greater role specialisation in certain asset classes, such as private markets.

“Smaller funds are continuing to outsource all or part of their CIO-type decisions and we expect this to continue.”

The research also shows that the shift to alternative assets continues apace, marking two decades of considerable change in pension fund asset allocation globally.

In 1999, just 6% of pension assets in the seven largest markets (P7) were allocated to private markets and other alternatives, compared with 23% in 2019.

This shift comes largely at the expense of equities and bonds, down 16% and 1% respectively. The average P7 asset allocation is now equities 45%, bonds 29%, alternatives 23% and cash 3%.

It was also found that defined contribution (DC) assets continue to represent more than 50% of total P7 assets after this threshold was passed for the first time last year.

"But the challenge of member engagement, critical for a stronger DC system, remains an unresolved issue for many schemes," Hall continued.

"Advances in technology are opening up new possibilities for customisation, changing the nature of member interactions and re-setting member expectations.

"The future of DC is likely to be hyper-customised, with increased focus on individual participants, but many schemes need to improve their governance to fully embrace this.”

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