ARLINGTON, Va., Jan. 30, 2017 (GLOBE NEWSWIRE) -- Global institutional pension fund assets in 22 major markets grew to $36.4 trillion by year-end 2016, according to the latest figures in Willis Towers Watson’s (NASDAQ:WLTW) Global Pension Assets Study, representing an increase of 4.3% in the 12-month period. Total pension assets in these countries amount to 62% of their GDP.
The report also shows pension fund assets have grown at 3.8% on average per year over the past five years, with the growth rate highest in China (20.3%), where the study covers the enterprise annuity market, and lowest in Japan (–5.4%).
Growth in defined contribution (DC) assets continued to outstrip that of defined benefit (DB) assets, with DC assets now accounting for over 48% of global pension assets, compared with around 41% in 2006. DC assets have grown at a rate of 5.6% over the past decade, compared to 2.6% for DB assets.
“Pension funds worldwide made some progress against their headwinds in 2016,” said Steve Carlson, head of Investment, North America. “This was largely because equity markets and alternative asset classes produced gains ahead of expectations. While funds in many countries have large pension outflows to deal with, it was encouraging to see overall asset values rise in the vast majority of countries covered in the study.”
During the past 20 years, the study identified a fall in allocations to equities and bonds, offset by an increase in allocations to alternative assets. The study also confirmed a continuing globalizing trend, as indicated in the reduction in pension funds’ bias to domestic equities markets, with the weighting of domestic equities falling on average from 69% in 1998, to 43% in 2016. Of the markets analyzed, Canada, Switzerland and the U.K. had the lowest percentage allocation to domestic equities markets, while U.S. funds had the highest exposure to domestic equities.
“Increased diversification has been the principal strategy for managing pension fund risk around the world, as evidenced in the upward trend in allocations to alternative assets and a sustained shift from domestic equity markets. The key to success will be confronting global, regional and local risks, in addition to remaining on top of regulatory changes and improving governance practices,” said Carlson.
Other highlights from the study
Global asset data for the P22 in 2016
Asset allocation for the P7
DC and DB assets for P7
Notes to editors
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About Willis Towers Watson
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