Global institutional pension fund assets in the 13 major markets grew by 9% during 2012 to reach a new high of US$30 trillion, according to Towers Watson’s
Global Pension Assets Study
released today. The growth is the continuation of a trend which started in 2009 when assets grew 17%, and in sharp contrast to a 21% fall during 2008 which took assets back to 2006 levels. Global pension fund assets have now grown at over 7% on average per annum (in USD) since 2002, when they were under half their current level. In the United States, institutional pension fund assets hit an all-time high of $16.9 trillion in 2012, having increased 10% during the year.
The study reveals that the growth in assets helped to strengthen pension fund balance sheets
globally during 2012. Furthermore, the ratio of global assets to GDP is just below the level reached in 2007. According to the study, pension assets now amount to 78% of global GDP, which is significantly higher than the 72% recorded in 2011 and substantially higher than the 61% recorded in 2008.
“Given the extreme economic and market volatility we have experienced during the past five years it was a relief for many pension funds to finish the year in better shape than when it started, for a change,” said Carl Hess, global head of investment at Towers Watson. “While volatile markets are expected to continue for the foreseeable future, pension funds are now generally better equipped to deal with them. During the past five years we have seen many funds deal with their governance shortfalls and as a result a growing number of funds have either more qualified people working on their investments or they have outsourced the running of all or part of their portfolios to third parties. In addition, pension funds are implementing investment strategies that are more flexible and adaptable and which contain a broader view of risk so as to make greater allowance for extreme events.”