For World’s Pensions, Asia Sees Growth while America Falters

Asian pension funds (including Australia) gained 19% in the past five years, according to a study by Watson Wyatt; North American funds, on the other hand, returned just 4%.

(September 10, 2009) – Asian and Australian pension funds have vastly outperformed their American brethren in recent years, a new study shows.

According to a Watson Wyatt/P&I report, the Asia Pacific region—which includes the mighty Australian super funds—has appreciated 19% over the past five years. This figure significantly outdoes the 4% return by North American funds over the same time frame. These growth returns take into account contributions from plan sponsors and investment returns.

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The survey—which looks at the 300 largest pension funds globally—also indicates that larger funds did better, on average, than smaller ones. While the average pension plan in the survey lost 12.6% overall in 2008, the largest funds—those in the top 20—only lost 4.1% on average. This had the effect of seeing the 20 largest funds increase their share of total assets from 36.5% to 40.6%. Funds that fell out of this top 20 included both the Ontario Teachers’ Pension Plan and the Canada Pension Plan (which lost 34% and 30%, respectively), as well as American-based AT&T (-23.8%) and New York State Teachers’ (-16.6%). Taking their place were Denmark’s ATP, Japan’s National Public Service Fund, and the provident funds of both Singapore and Malaysia.

While the growing prominence of Asian and European funds may signal a shift in global asset-owner power, America, despite poor recent returns, still holds a near-majority of pension fund assets (40%, down from 43% in 2007).

To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

British final salary schemes with surpluses increased their funding status in August, according to new figures; the same, however, cannot be said for underfunded plans.

(September 10, 2009) – The best are getting better and the worst worse, according to recent figures on United Kingdom (UK) defined benefit (DB) pension scheme funding levels.

According to the Pension Protection Fund (PPF), August brought with it, on average, worsening funding positions for the 7,400 DB schemes tracked by the PPF with its 7800 Index. At the end of the final month of summer, the DB schemes covered had a total deficit of £173.2 billion, compared to a £158.1 billion deficit seen at the end of July.

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Interestingly, August saw a spread between those pensions running a deficit and those running a surplus. According to PPF, the entirety of deficits by schemes running deficit increased—going to £194.6 billion from £179 billion—while the total surplus of funds running a surplus increased from £20.9 billion to £21.4 billion.

This announcement, highlighting a dichotomy of performance by UK pension funds, comes on the heels of an equally negative report regarding de-risking at British pensions. According to consulting firm Hymans Robertson, half of British defined benefit pension schemes have failed to design a long-term strategy for risk reduction, despite 80% believing there is a need to do so.

Furthermore, while 75% of those surveyed had reduced investment risks at the stock market’s 2007 highs, risk aversion seems to prevail in the current environment, with only 45% of funds claiming that they have procedures in place to lock in returns from a rebounding equities market.

To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>