Total assets of the world's 300 largest pension funds climbed 11.5% in 2005, a slowdown compared with the 27% hike reported a year earlier, according to the annual survey conducted by Pensions & Investments and Watson Wyatt Worldwide.
A combination of factors helped to stunt the growth rate of many pension funds, including lower investment returns, a strengthening dollar that depressed overseas asset values when converted from local currencies and a decreasing rate of asset inflows because of the switch to defined contribution from defined benefit plans among many corporations.
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The P&I/Watson Wyatt 300 assets totaled $9.358 trillion in 2005, compared with $8.391 trillion in 2004. Assets of the top 20 pension funds grew 8.9% last year to $3.525 trillion, and the top 100 plans' combined $6.85 trillion was 11.7% higher than the previous year. Both increases paled in comparison to 2004, when the top 20 had a 50% increase and the top 100 saw a 31% gain.
The top 20 plans had 37% of the assets in all 300 funds in 2005; the previous year, 39% of assets were held by the top 20.
Although global market conditions in some regions such as the U.S. were less buoyant in 2005 in general compared with 2004, pension funds benefited from increasing diversification into alternative investments, said Roger Urwin, global head of investment consulting at Watson Wyatt in Reigate, England.
"Equities have become a little bit more attractive based on a very successful period of growth in corporate profitability," Mr. Urwin said. "But the reliance on equities is no longer as strong. A lot of time and agenda is given over to building successful alternative programs."