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Global DC Pension Assets Pass DB Assets for First Time

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Global institutional pension fund assets in the 22 major markets (P22) dipped in 2018.

This is according to the latest figures in the Global Pension Assets Study conducted by Willis Towers Watson’s Thinking Ahead Institute. The assets fell to $40.1 trillion at year end, which represents a decrease of 3.3% in the 12-month period.

The seven largest markets for pension assets (P7) — Australia, Canada, Japan, the Netherlands, Switzerland, the United Kingdom and the United States — account for 91% of the P22. The U.S. 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.

Notably, the report found that defined contribution (DC) assets account for more than 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 past 10 years, with DC assets growing by 8.9%, while defined benefit (DB) assets have grown by 4.6% during the same period.

The average asset allocation of the P7 is 40% equities, 31% bonds, 26% other assets and 3% cash. This marks a decrease of 20% 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 U.S. continued to have above average equity allocations, with 47% and 43%, respectively. Meanwhile, the Netherlands, UK and Japan have above average exposure to bonds, and Switzerland has the most even allocations across equities, bonds and other assets.

“Pension funds continue to face a range of issues over the next five to 10 years,” said Roger Urwin, global head of investment content at the Thinking Ahead Institute. “These include the shifting focus in pension design toward a DC model; the growing impact of evolved regulations; and further integration of ESG, stewardship and long-horizon investing.

 

 

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