OECD Pensions Remain Nearly 10% Below Pre-Crisis Levels

A study shows that even though pension assets in Organisation for Economic Co-operation and Development (OECD) countries remain below December 2007 levels, some countries. such as Hungary and Norway, have already recuperated completely from 2008 losses.

(July 14, 2010) — Research by the Organisation for Economic Co-operation and Development (OECD) has revealed that pension fund assets still remain below pre-crisis levels.

The Paris-based organization said in its July Pension Markets in Focus report that pension funds in OECD countries recouped about $1.5 trillion of the $3.5 trillion in market value they lost in 2008, spurred by rebounding equity prices last year. Still, assets remain about 9% below December 2007 levels.

The research shows that some countries have already recuperated completely from 2008 losses, including Austria, Chile, Hungary, Iceland, New Zealand, Norway, and Poland. Overall, Hungary saw the biggest returns of all European countries with 22%, followed by the Netherlands with 18% and Turkey with 17.1%.

“Despite these positive outcomes, funding levels for pension funds were still significantly lower at the end of 2009 than two years previously,” the report stated. The median funding deficit (the gap between assets and liabilities) for pension funds in OECD countries was 26% at the end of last year, compared with 23% a year earlier and 13% in 2007. Despite the positive news for some countries, OECD states have still only recovered around 40% of all losses made in 2008, with $2 trillion still to be regained.

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Additionally, the study showed public funds have recovered losses because of a more conservative investment strategy. Assets in public pension reserve funds across OECD nations were $4.5 trillion, a 7.3% increase from the end of 2008.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

(July 14, 2010) — Hedge fund returns have continued to drop in 2010 as concerns that the sovereign debt crisis in Europe may thwart a global economic recovery persist.

The decline reflects recent expectations by Byron Wien, vice chairman of Blackstone Group LP’s advisory services division, who said during the Monaco-based GAIM International hedge fund conference that hedge fund returns may halve as firms seek to protect investors’ capital.

Hedge funds have been struggling this year amid signs of a global economic downturn, following 2009’s strong year, when hedge funds returned an average 20%. Hedge funds lost an average of 0.5% in June after losing 2.6% in May, with the overall sector posting a negative 0.02% for the current year, according to the Eurekahedge Hedge Fund Index, which measures the performance of more than 2,000 funds worldwide.

In related news, a recent study by Northern Trust Global Advisors (NTGA) shows institutional investment managers have moderated their expectations for global growth. The study revealed institutional investment managers are less optimistic about near-term global growth and more concerned that the Euro debt crisis will continue to affect markets for at least another six months.

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“I think the survey shows managers are worried about the global economy in general, since the US economy is linked to the global economy” said Northern Trust’s Janet Yang to ai5000.

The second-quarter survey reflected a significant shift in optimism from the prior four quarters, with more than two-thirds of respondents expecting sovereign debt concerns in Portugal, Italy, Ireland, Greece and Spain to negatively impact global markets. Seventy-five percent of those surveyed anticipate that global growth will remain the same or decelerate.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742