Press Release

Global pension fund assets crab sideways

DC asset levels close in on DB assets

February 2, 2016
| Australia, Brazil, Canada +16 more
  • Chile
  • France
  • Germany
  • Hong Kong
  • India
  • Ireland
  • Japan
  • Malaysia
  • Mexico
  • Netherlands
  • South Africa
  • South Korea
  • Spain
  • Switzerland
  • United Kingdom
  • United States

LONDON, Tuesday 2 February, 2016 – Global institutional pension fund assets in 19 major markets weighed in at $35.4 trillion at year end 2015 according to Willis Towers Watson’s Global Pension Assets Study released today. The asset values crabbed sideways in 2015 being up during the early part of the year and down a little by the end of the year. 

The assets are equivalent to 80% of their underlying countries’ GDP and account for around 35% of the institutional assets available to investors in world capital markets. Global pension fund assets have now grown at 5% on average per annum (in USD) since 2005, when they were just in excess of US$21 trillion.

While asset values were little changed in 2015, the study highlights six areas of significant change: the move in pension design towards DC, the demands on investment talent, the internal focus to the pension funds’ value chain, governance improvements, increased risk management focus, and the increased consideration of sustainability and ESG. 

The study shows that defined contribution (DC) assets grew rapidly for the ten-year period to 2015, with a compound annual growth rate (CAGR) of 7%, against a rate of just over 3% for defined benefit (DB) assets.  As a result, DC pension assets now represent over 48% of global pension assets.

Roger Urwin, global head of investment content at Willis Towers Watson, said: “The shift to DC, being led by the US market, has been the trend for some years now. However, DC funds remain handicapped by the limitations in governance models, risk-sharing models, and investor understanding.  We remain concerned that pension provisions will fall well short of member expectations based on a central investment outlook for decidedly skinny returns which is compounded by relatively low contribution rates. On top of capital market risks there remain large risks of regulation and governance mismanagement.”

The study confirms a number of trends in pension fund investment strategy. Allocations to alternative assets - especially real estate and to a lesser extent hedge funds, private equity and commodities - in the larger markets have grown from 5% to 24% since 1995. In the past decade most countries have increased their exposure to alternative assets with Canada increasing them the most (from 14% to 27%), followed by the UK (7% to 18%), Switzerland (18% to 29%), US (17% to 27%) and Japan (from 3% to 9%). 

The study also confirms the increased globalisation in equities. The home bias in equities has diminished with the weight of domestic equities in pension portfolios falling on average, from 65% in 1998 to 43% in 2015. During the past ten years US pension plans have maintained the highest bias to domestic equities (63% in 2015). Canadian and Swiss funds remain the markets with the lowest allocation to domestic equities (25% and 35% respectively in 2015) while UK exposure to domestic equities has more than halved, to 35%, since 1998. The research shows Canadian and US funds have retained a very strong home bias in fixed income investment since the research began (98% and 87% respectively in 2015), while Swiss funds have reduced exposure to domestic bonds significantly since 1998: down by 34%. Meanwhile Australia has increased exposure to domestic bonds by 7% in the past two years.

Roger Urwin said: “Asset diversification into alternatives and the shift away from domestic equities, have gained momentum among pension funds around the world, as these strategies have helped to manage risk. The persistent economic uncertainty is likely to reinforce these shifts. 2016 has started with highly volatile conditions and some material falls in value in January have reflected the uncertainty around global growth overlaid with geo-political challenges. The challenges of pension funds worldwide have been severe and onerous for more than a decade with no signs of respite. The success formula remains being tough on risk and being smart on governance.”

Other highlights from the study include:

Global asset data for the P19 in 2015


  • The ten-year average growth rate of global pension assets (in local currency) is 7% 
  • The largest pension markets are the US, the UK and Japan with 62%, 9% and 8% of total pension assets, respectively
  • All markets in the study have positive ten-year compound annual growth rate (CAGR) figures (in local currency), with the exception of Japan
  • In terms of ten-year CAGR figures (in local currency terms), Chile has the highest growth rate of 18% followed by Mexico (15%), South Africa (11%), Australia (9%), Hong Kong (9%), Brazil (8%), Canada (8%), Netherlands (7%) and the UK (7%). The lowest are Japan (-0.2%), Switzerland (2%) and France (2%)
  • Ten-year figures (in local currency) show the Netherlands grew their pension assets the most as a proportion of GDP by 75% to reach 184% followed by the Chile (by 57% to 118% of GDP), the UK (by 32% to 112% of GDP) and Australia (by -36% to 120% of GDP).

Asset Allocation for the P7


  • Bond allocations for the P7 markets have decreased by 7% in aggregate during the past 20 years (36% to 29%). Allocations to equities have fallen by 8% (to 44%) during the same period
  • Equity allocations have fallen in all the P7 markets. Equity allocations by UK pension funds have decreased from 66% in 2005 to 43% in 2015 while equity allocations by Japanese pension funds have fallen from 49% to 31% in the same period. During the same period, US equity allocations fell from 61% to 47% and Australia’s allocation to equities fell from 56% to 48%. Australian funds have maintained the highest allocation to equities over time, reaching 48% in 2015  
  • UK pension funds have increased their allocation to bonds during this period (from 25% to 37%) as have Japanese funds (from 44% to 57%). Two countries in the study have meaningfully decreased their allocation to bonds during this period: Switzerland (from 41% to 35%) and Australia (from 19% to 14%).

DC / DB assets for P7


  • In 2015 Australia had the highest proportion of DC to DB pension assets: 87% / 13%, followed by the US: 60% / 40%. Only Australia and the US have a larger proportion of DC assets than DB assets. 
  • Japan, Canada and the Netherlands are markets dominated by DB pensions with 96%, 95% and 95% of assets respectively invested in these types of pensions. Historically only DB, these markets are now showing small signs of a shift towards DC.

Notes to editors


  • The P19 refers to the 19 largest pension markets included in the study which are Australia, Brazil, Canada, Chile, France, Germany, Hong Kong, India, Ireland, Japan, Malaysia, Mexico, Netherlands, South Africa, South Korea, Spain, Switzerland, the UK and the US. The P19 accounts for around 85% of global pension assets.
  • The P7 refers to the 7 largest pension markets (almost 93% of total assets in the study): Australia, Canada, Japan, Netherlands, Switzerland, UK and US.
  • All figures are rounded and 2015 figures are estimates 
  • All dates refer to the calendar end of that year.

ABOUT WILLIS TOWERS WATSON INVESTMENT

Willis Towers Watson’s Investment business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 850 associates worldwide, assets under advisory of over US$2.2 trillion and over US$75 billion of assets under management.

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 39,000 employees in more than 120 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.




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