Towers Watson: Global retirement assets hit record $30 trillion

Dollar sign with globe

Retirement assets in the 13 major global markets increased 9% to a record $30 trillion as of Dec. 31, according to Towers Watson's annual Global Pension Assets Study.

U.S. institutional assets also reached an all-time high of $16.9 trillion, making up more than 56% of total global assets. Japan and the U.K. have the next-largest shares at 13% and 9%, respectively. The 10-year average growth rate of global assets for the 13 countries is more than 8% in local currency.

Fund balance sheets strengthened globally in 2012, gaining 2.7% from assets growing faster than liabilities. In 2011, the growth was -4.3%.

Since 1995, overall allocations to equity and fixed income dropped, while alternative allocations increased to 19% from 5% for the seven largest markets — U.S., U.K., Japan, Netherlands, Canada, Australia and Switzerland, which made up 95% of the assets in the study. U.S. alternatives allocations increased to 20% from 10% in the last decade.

Fixed-income allocations for the seven largest markets dropped to 33% from 40%, while equity fell to 47% from 49% in the same time period. Australia and the U.S. had the highest equity allocations at 54% and 52%, respectively, while Netherlands had highest bond allocation at 55%.

“It's a continuation of the trends that have been in place for some time,” such as shifting to alternatives from equities and reducing home-country bias, said Matthew Stroud, head of strategy and portfolio construction in the Americas. In the U.S., the pace of equity portfolios going global and the adoption of more alternative strategies accelerated in the past year.

Defined contribution assets for the seven largest markets now make up 45% of global retirement assets, up from 43% in 2011. The U.S. and Australia were the only countries where DC assets outweighed DB ones with more DC assets than DB. For the past 10 years, the compound annual growth rate of DC assets in the largest markets was 7.8% vs. 6.6% for DB assets.

Pension assets amounted to 78% of global GDP, up from 72% at the end of 2011. In the U.S., pension assets amounted to 108% of GDP, up from 84% at the end of 2002. .

All 13 markets had a positive 10-year compound annual growth rate in local currency terms, led by Hong Kong and Brazil at 14% each. Japan and France had the lowest rates at 2% each.

Sixty-five percent of assets in the seven largest markets were held by the private sector. Japan and Canada are the only countries with more public assets than private.