Global pension fund assets hit record $ 28 trillion

Monday, 13 February 2012 00:00 - - {{hitsCtrl.values.hits}}

Global institutional pension fund assets in the 13 major markets grew by 4 per cent in 2011 to hit a new high of $28 trillion, up from $26 trillion the previous year, according to a new study by Towers Watson, a leading global professional services company.

The growth is the continuation of a trend which started in 2009 when assets grew 17 per cent, and in sharp contrast to a 21 per cent fall during 2008 which took assets back to 2006 levels, said the Towers Watson report released last week.

Global pension fund assets have now grown at over 6 per cent on average per annum (in dollars) since 2001, when they were valued at $15 trillion.

The Global Pension Assets Study reveals that, despite the growth in assets, pension fund balance sheets weakened globally during 2011, with the ratio of global assets to liabilities well down from its peak achieved in 1999.

According to the study, pension assets now amount to 72 per cent of global GDP, which while lower than in 2010 (76 per cent) is substantially higher than the 61 per cent recorded in 2008.

Carl Hess, global head of investment at Towers Watson, said: “In case investors needed any reminding, the last six months of 2011 have driven home the need to have investment strategies that are flexible and adaptable and which contain a broader view of risk.”

“This approach makes greater allowance for extreme events, which are occurring more frequently, while accommodating the softer elements of risk, such as credit and liquidity. The past few years have focused attention on the multi-faceted nature of risk within our increasingly precarious financial systems.”

“At the same time risk management processes have evolved somewhat to factor in more qualitative measures. However, there is still some way to go before the appropriate measurement and management of risk is firmly embedded in the governance structures of most pension funds,” he added.

According to the report, the US, Japan and the UK remain the largest pension markets in the world, accounting for 59, 12 and 9 per cent respectively of total pension fund assets globally.