Pension fund assets up, but balance sheets weak

PensionersGlobal institutional pension fund assets in the world's 13 major markets increased 4% to $28 trillion (€21 trillion) in 2011, according to research from consultancy Towers Watson.

But this growth came as pension fund balance sheets continued to weaken. The ratio of global assets to liabilities – measured using sovereign bond yields to discount liabilities – is well below its peak achieved in 1999.

The UK is still the largest market for pensions in Europe, accounting for 9% of world pension fund assets. It is the third-largest in the world behind the US, with 59%, and Japan with 12%.

World pension fund assets have been on an upward trend for the past decade, with the exception of 2008, when assets fell 21%. Since 2001, global assets have grown at an average rate of 6% a year, in dollar terms.

However, global pension fund assets as a proportion of global GDP fell from 76% in 2010 to 72% last year, a result that reflects market volatility that has hampered returns.

"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,” said Chris Ford, EMEA head of investment at Towers Watson.

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