Benefits and Compensation

U.S. Pension Fund Assets Grew by 12.7% in 2017, Says New Study

Global institutional pension fund assets in the 22 major markets grew to $41.3 trillion at year-end 2017, according to latest figures in the Thinking Ahead Institute’s Global Pension Assets Study, representing the highest figure since the report began in 1997.


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The total value of assets grew by $4.8 trillion in 2017, which is the largest single-year growth in the last 20 years and represents growth of over 13% during the year. The report also shows that pension fund assets have grown steadily in the last 20 years at an average rate of 6.2% per year, closely matching global public market equity and bond returns during the same period.

“While the short-term figures are positive, these are due to unusually high market returns,” said Steve Carlson, head of North America Investments, Willis Towers Watson—in a press release. “Looking back at 20 years of progress makes for an encouraging read. In particular, the improving position of pension assets as a proportion of GDP and the evolution of pension fund governance has risen up trustees’ agendas and is certainly a lot stronger as a result.”

Looking at the relative growth rates of defined contribution (DC) and defined benefit (DB) assets for the seven largest pension markets in the last two decades, the study shows that DC assets grew at 7.9% per year compared with 4.5% for DB assets. DC now accounts for 49% of total assets across the seven largest pension markets in the world as these funds continue to experience positive net cash flow and relatively lower levels of benefit withdrawals compared with their DB counterparts.

“We would expect DC assets to become larger than DB assets within the next two years. With DC models in the ascendancy, it is important that governance issues and the shift in risk to the end saver are closely monitored, without regulation becoming a burden and hindering the ability of DC plans to deliver optimal outcomes,” said Carlson. “In addition, traditionally DB-focused countries are showing signs of a shift toward adopting DC pension plans.”

The study also found reduced home bias for equities in the last 20 years, falling to 41.1% in 2017 from 68.7% in 1998. In the past 10 years, the U.S. market has maintained the largest allocation to domestic equities while Canada, Switzerland, and the U.K. have had the lowest.

“Risk management and diversification continue to be a significant focus for asset owners, epitomized by the rise of private assets over the lifetime of this study, rising from 4% of allocations in 1997 to around 20% today,” said Carlson. “As our understanding of these asset classes has increased, so have the strategies in allowing funds to go beyond traditional means of diversification. That said, the challenges faced by pension funds are complex. They must consider regulation, changes in the available investment universe, new investment methods, and how to measure progress and success of a pension plan. There is also the developing issue of true integration of ESG [environmental, social and governance], stewardship and sustainability within overarching investment strategies.”

Other highlights from the study include:

Global Asset Data for the P22 in 2017

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 U.S. (61.4%) continues to be the largest market in terms of pension assets, followed by the U.K. (7.5%) and Japan (7.4%).
  • Total pensions assets to GDP ratio were 67% at the end of 2017.
  • The Netherlands continues to have the highest ratio of pension assets to GDP (194%) followed by Australia (138%) and Switzerland (133%).
  • The average 10-year compound annual growth rate figures (in USD) for P22 markets is 4.2%.
  • Estimated 5-year growth rates (in local currency) range from 2.0% per annum to in Spain to 19.1% in China.
  • While the U.S. continues to hold the largest weighting (61%) within the P22, the weights of Brazil, Canada, Finland, France, Germany, Ireland, Japan, Netherlands, South Africa, Spain, and the U.K. have declined relative to the other markets in the study.
  • 10-year figures (in local currency) show the Netherlands grew its pension assets the most as a proportion of GDP by 68% to reach 194%, followed by the U.K. (88% to 121%), Canada (83% to 108%), and the U.S. (106% to 131%).

Asset Allocation for the P7

The P7 refers to the seven largest pension markets (91.7% of total assets in the study): Australia, Canada, Japan, Netherlands, Switzerland, the U.K., and the U.S.

  • Equities allocations for the P7 markets have decreased by 11% in aggregate during the past 20 years (57% to 46%).
  • Allocations to bonds have also fallen in P7 markets during the same period, from 35% in 1997 to 27% in 2017.
  • Pension fund assets managed by the top 100 alternative asset managers rose to US$1,612 billion in 2017 according to Willis Towers Watson’s Global Alternatives Survey.
  • The Netherlands (43% to 50%), Japan (50% to 56%), and the U.K. (30% to 35%) are the three markets that have increased allocations to bonds by the largest amount during the past 10 years.

DC/DB Assets for P7

  • In 2017, Australia continued to have the highest proportion of DC to DB pension assets, with 87% of its total pension assets in DC funds.
  • DC pension assets have grown from around 33% in 1997 to 49% in 2017 of total pension assets.
  • Japan (96%), Canada (95%), the Netherlands (94%), and the U.K. (81%) continue to be markets dominated by DB pension assets.

About the Thinking Ahead Institute

The Thinking Ahead Institute is a global not-for-profit member organization whose aim is to influence change in the investment world for the benefit of savers. The Institute’s members comprise asset owners, investment managers and other groups that are motivated to influence the industry for the good of savers worldwide and is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group.

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