02/11/2019 | Press release | Distributed by Public on 02/11/2019 03:22
LONDON, 11 February 2019 - Global institutional pension fund assets in the 22 major markets (the 'P22') fell to $40.1 trillion at year end 2018, according to the latest figures in the Thinking Ahead Institute's Global Pension Assets Study. This represents a decrease of 3.3% in the 12-month period.
The seven largest markets for pension assets (the 'P7') - Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US - account for 91% of the P22. The latest study shows that the US continues to be the largest pension market, representing 61.5% of worldwide pension assets, followed by Japan and the UK with 7.7% and 7.1% respectively.
The report also found that DC assets now account for over 50% of total assets across the seven largest pension markets, for the first time. This continues the trend of DC growing at a faster pace over the last ten years, with DC assets growing by 8.9%, while defined benefit (DB) assets have grown by 4.6% during this time.
The average asset allocation of the P7 is equities 40%, bonds 31%, other 26% and cash 3%. This marks a decrease of 20 percentage points in equity allocations over the past 20 years, while allocations to other assets, such as real estate and other alternatives, have increased by 19 percentage points.
Australia and the US continued to have above average equity allocations, with 47% and 43% respectively. Meanwhile, the Netherlands, UK and Japan have above average exposure to bonds, while Switzerland has the most even allocations across equities, bonds and other assets.
Roger Urwin, Global Head of Investment Content at the Thinking Ahead Institute, said: 'Three things really stood out in 2018. First, we've reached a pivotal moment in the DC pension assets growth story, as they exceed DB pension assets for the first time, after a slow and steady grind over 40 years. But despite its long history, DC is still weakly designed, untidily executed and poorly appreciated.
'Second is how much funds have benefited from private market diversification. 2018 was the third worst year for pension asset growth in the last 20, but it would have been quite a lot worse without the contribution from private markets that produced important risk diversification.
'Third, Australia undertook two significant reviews of its superannuation fund industry through 2018 into 2019 and surfaced a number of far-ranging criticisms. This scrutiny seems to have the potential to give the Australian industry more sensitivity to member value premised on better engagement and considerably more efficiency.
'Pension funds continue to face a range of issues over the next five to ten years. These include the shifting focus in pension design towards a DC model, the growing impact of evolved regulations and further integration of ESG, stewardship and long-horizon investing.'
Other highlights from the study include:
Global asset data for the P22 in 2018
Asset Allocation for the P7
DC / DB assets for P7
Notes to editors:
About the Thinking Ahead Institute
The Thinking Ahead Institute was established in January 2015 and is a global not-for-profit investment research and innovation member group made up of engaged institutional asset owners and service providers committed to changing and improving the investment industry for the benefit of the end saver. It has over 40 members around the world and is an outgrowth of the Thinking Ahead Group which was set up in 2002. Learn more at www.thinkingaheadinstitute.org.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas - the dynamic formula that drives business performance. Together, we unlock potential.