In 22 major
markets, global institutional pension fund assets in defined contribution (DC) and
defined benefit (DB) plans grew by 4.3% in 2016, and have grown by 3.8% per
year over the past five years, according to a new study by the global advisory
firm Willis Towers Watson. The assets grew to $36.4 trillion in 2016 and total pension assets
amount to 62% of their countries’ GDP. China showed the highest growth rate at
20.3%, where the study covers the enterprise annuity market, and Japan, at
–5.4%– was the lowest.
DC assets, growing at a
rate of 5.6% over the past decade, continued to outstrip that of DB assets,
which grew by 2.6%. DC assets now account for more than 48% of global pension
assets, rising 7% since 2006, according to the study.
worldwide made some progress against their headwinds in 2016,” Steve Carlson,
head of Investment, North America, at Willis Towers Watson, said in a statement.
“This was largely because equity markets and alternative asset classes produced
gains ahead of expectations. While funds in many countries have large pension
outflows to deal with, it was encouraging to see overall asset values rise in
the vast majority of countries covered in the study.”
noted an increase in allocations to alternative assets and a global trend with
a decline in allocations to equities and bonds. The weight of domestic equities
average to 43% in 2016
from 69% in 1998. The
US had the largest market in terms of pension
assets, and the highest exposure to domestic equities, while Canada,
Switzerland and the U.K. had the lowest, according to the study.
The US, UK
and Japan, respectively, are the three largest markets, accounting for more
than 77% of total assets.
Of the 22 markets, the
Netherlands grew its pension assets the most in proportion to GDP over 10 years.
In the past decade, out of Australia, Canada, Japan, Netherlands,
Switzerland, UK and US, the
countries that increased allocations to bonds most were The Netherlands (44% to
54%), the UK (24% to 36%) and Japan (46% to 59%), according to the study.
also found currencies that experienced the largest depreciation against
the USD in 2016 were the Great British Pound (-17.0%), the Mexican Peso
(-16.4%), the Chinese Yuan (-6.6%), the Malaysian Ringgit (-4.2%) and the Euro
at year-end 2016 were based on index movements, and before 2006, researchers
focused only on ‘institutional pension fund assets’, primarily occupational
pensions. After 2006, the analysis was widened
to incorporate DC assets (IRAs) within US’s total pension assets. Due to
unavailability of pension data in China, the study collected information on
Enterprise Annuity assets only.
Related Link: Corporate Pension Fund Levels Stagnate in 2016