Study: Global Pension Assets Up 15% in 2009

(February 2, 2010) — While global pension fund assets recovered in 2009, they are still below 2007 levels, according to a new study from Towers Watson.

In the 13 major markets, global institutional fund assets increased 15% last year to more than $23 trillion, compared to a 21% fall in asset values in 2008.

“The global financial crisis was a huge wake-up call and problems of poor systemic design in the industry point to increased likelihoods of further periods of financial distress in future,” said Carl Hess, global director of investment at Towers Watson. “I fear that without exceptional leadership we will have another tough decade in the pension and investment world.”

According to the study, even though pension funds are beginning to recover from 2008 losses, issues that emerged during the financial crisis still remain: liquidity, solvency, risk management, asset manager underperformance and new challenges in strategic asset allocation.

As of December 31, the average pension fund in the seven largest markets – U.S., Japan, U.K., Canada, Netherlands, Australia and Switzerland – allotted 54.4% to equities, up from 48% in 2008, with the UK, United States, Australia and Canada investing above this average level. On the other hand, British pension funds have cut their exposure to equities to 60% in 2009 from 77% in 1999. Pension schemes invested 26.9% in bonds, 17.4% in alternatives and 1.3% in cash, Pensions & Investments reported. Japan appeared to have the most conservative portfolio with a 56% allocation to bonds, closely followed by the Netherlands with 48% and 36% in Swiss pensions.

The research found pension assets amount to 70% of the average global GDP, compared with 76% a decade earlier and 58% in 2008.