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Global pension assets on the rise

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February 10, 2020

ARLINGTON, VA, February 10, 2020 Global institutional pension fund assets in the 22 largest major markets (the P22) bounced back in 2019, soaring by 15% to $46.7 trillion at year-end, according to the latest figures in the Thinking Ahead Institute’s Global Pension Assets Study. The growth recovery was driven, in part, by strong gains in equity markets during the year, with Mexico (22.2%), Canada (18.9%) and the U.S. (17.8%) leading the way. This represents a significant swing in fortunes from 2018, which saw an overall 3.3% decline in global pension assets.

The seven largest markets for pension assets (the P7) — Australia, Canada, Japan, the Netherlands, Switzerland, the U.K. and the U.S. — account for 92% of the P22, marginally higher than the previous year. The U.S. also remains the largest pension market, representing 62% of worldwide pension assets, followed by the U.K. and Japan with 7.4% and 7.2%, respectively.

The research also shows the shift to alternative assets continues apace and marks two decades of considerable change in pension fund asset allocation globally. In 1999, just 6% of P7 pension fund assets were allocated to private markets and other alternatives, compared to nearly a quarter of assets (23%) in 2019. This shift comes largely at the expense of equities and bonds, down 16% and 1%, respectively, in the period. The average P7 asset allocation is now equities 45%, bonds 29%, alternatives 23% and cash 3%.

“Besides strong growth in assets last year, there was a noticeable pickup in the decade-long trend of funds developing stronger strategies around their people. Larger funds, particularly those above $25 billion, continued to build larger, more sophisticated internal teams, with stronger leadership through CEO and CIO roles and greater role specialization in certain asset classes such as private markets. Smaller funds continue to outsource all or part of their CIO-type decisions, and we expect this to continue,” said Marisa Hall, co-head, Thinking Ahead Institute.

According to the research, total defined contribution (DC) assets continue to grow, representing slightly over 50% of total P7 pension assets. Last year, DC exceeded defined benefit (DB) assets for the first time, a culmination of 10 years of faster DC assets growth than DB (8.4% versus 4.8% annually), reflecting increased member coverage and, in some markets, higher contributions.

“The DC market has retained its newly found position as the larger of the two, as DB assets grow at a far slower pace. But the challenge of participant engagement, critical for stronger DC effectiveness, remains an unresolved issue for many sponsors,” said Michele Brennan, U.S. Defined Contribution Solutions leader, Willis Towers Watson. “As such, in the U.S. we expect this to be a particular focus for leading DC organizations as the next generation of plans takes shape. Also, with more flexible DC legislation and advances in technology, we see innovation in DC plans continuing. All leading to improvements within the nature of sponsor and participant interactions and resetting expectations.”

Other highlights from the study


Global asset data for the P22 in 2019

  • The U.S. (62.5%) continues to be the largest market in terms of pension assets, followed by the U.K. and Japan with 7.4% and 7.2%, respectively.
  • Total pensions assets to GDP ratio was 68.8% at the end of 2019.
  • The Netherlands continues to have the highest ratio of pension assets to GDP (187%), followed by Australia (151%) and Switzerland (146%).
  • The average 10-year compound annual growth rate figures (in U.S. currency) for P22 markets is 6.5%.
  • Estimated five-year growth rates (in local currency) range from –0.6% per year in France to 15.2% in India.
  • The U.S. continues to hold the largest weighting (62.5%) within the P22; while the weights of Hong Kong and South Korea marginally increased relative to the other markets in the study over the past 10 years.
  • 10-year figures (in local currency) show the Netherlands grew its pension assets the most as a proportion of GDP by 73 percentage points (pp) to reach 187%, followed by Australia (41 pp to 151%), the U.S. (41 pp to 136%), Switzerland (40 pp to 146%) and the U.K. (39 pp to 126%).

Asset allocation for the P7

  • Equities allocations for the P7 markets have decreased by 16 pp in aggregate during the past 20 years (61% to 45%), which funded the corresponding increased allocation to alternative assets.
  • Allocations to bonds remained broadly unchanged in P7 markets, down 1 pp to 29%.
  • The home bias toward equities has fallen, on average, with the weighting down to 39.7% in 2019 from 68.6% in 1999.

DC/DB assets for P7

  • DC pension assets have grown from 31% in 1999 to 50% in 2019 of total pension assets.
  • Australia continued to have the highest proportion of DC to DB pension assets, with 86% of its total pension assets in DC funds.
  • Japan (95%), Canada (94%), the Netherlands (94%) and the U.K. (82%) continue to be markets dominated by DB pension assets.

Notes to editors

  • The P22 refers to the 22 largest pension markets included in the study, which are Australia, Brazil, Canada, Chile, China, Finland, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, South Africa, South Korea, Spain, Switzerland, the U.K. and the U.S.
  • The P7 refers to the seven largest pension markets (92% of total assets in the study): Australia, Canada, Japan, Netherlands, Switzerland, U.K. and U.S.
  • All figures are rounded, and 2019 figures are estimates.
  • All dates refer to the calendar end of that year.

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 mobilizing capital for a sustainable future. It has over 40 members around the world and is an outgrowth of the Willis Towers Watson Investments’ 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 45,000 employees serving more than 140 countries and markets. 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. Learn more at willistowerswatson.com.

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