U.S. pension assets reached $7.296 trillion by Sept. 30, a three-month increase of 5.4% and a one-year increase of 23%, according to Federal Reserve data.
Private pension funds, accounting for about half of all the assets, were valued at $3.547 trillion as of Sept. 30, up more than 6% from the previous quarter and almost 23% from a year earlier, the latest Flow of Funds report shows.
Public pension assets were worth $2.067 trillion at the end of the third quarter, almost 5% higher than the previous quarter and more than 23% above year-earlier numbers.
Pension fund reserve assets at life insurance companies totaled $1.24 trillion as of Sept. 30, up 5% from the previous quarter and 15% from a year earlier. Federal government insurance and pension reserves stood at $441.2 billion on Sept. 30, up 4.5% from the previous quarter and 7.6% from a year ago.
A rising stock market and, to a lesser degree, increasing allocations to equities were the primary factors behind the jump in total asset value, consultants said.
Pension funds - private and public - held $3.039 trillion worth of stocks at the end of the third quarter, an almost 9% increase from three months earlier and a whopping 39% more than one year earlier. Pension funds' equity ownership was 26.6% of the $11.383 trillion in the U.S. corporate market, up slightly from 26.36% a year earlier.
Tom Lightvoet, principal at Mercer Investment Consulting's Los Angeles office, said the bull market was the prime reason for the jump.
"Despite the volatility of 1997, and all the market bouncing that took place, pension assets continued to flow into equities and values continued to rise," he said. "I think we would have to see a sustained - and that's the key word - bear market in order to see a significant change in those flows of dollars."
Ricardo Reinking, investment consultant with Hewitt Associates, Lincolnshire, Ill., noted 401(k) plans add to the value of retirement plan equities.
Private pension funds' mutual fund holdings were $397.3 billion as of Sept. 30 - up 11% for three months and 44% for the year.
"It would make sense that a good part of that sizable jump is attributable to growth in DC plans," Mr. Reinking said. "DC plans have grown significantly over the last year, that's for sure. There is little doubt that in 1997 more people were placing more money into 401(k) plans, and those (Fed) numbers reflect that growth."
On the non-equity side, Fed stats reveal that state, local and private pension funds held a combined total of $501.5 billion in corporate and foreign bonds as of Sept. 30, up 2.5% from $489.1 billion the previous quarter, and 10.5% higher than the $453.6 billion held during the same period last year.
Combined state, local and private pension funds owned $487.3 billion of Treasury securities at the end of the third quarter, up 1.5% from the previous quarter and 7.4% from a year earlier. Money market mutual fund shares held by private pension funds increased 10% during the one-year period ended Sept. 30, to $44.2 billion.