Buoyed by strong domestic and international equity markets, U.S. pension funds had the best return last year among six major pension markets.
With a median 13.7% return for 2006, U.S. funds nearly doubled their 2005 return of 7.3%, according to estimates by Callan Associates Inc., San Francisco. A year ago, the U.S. placed at the bottom of the six-country rankings.
Australian funds came in a strong second, with a 13.5% average return for corporate and industrywide pension funds in 2006, according to JANA Investment Advisers Pty. Ltd., Melbourne. In 2005, corporate pension plans averaged 13.6%, while industrywide plans gained 14.5%.
Canadian pension funds, one of the more consistent performers in the past two years, ranked third with a 13% investment return in 2006, compared with 12% in 2005, according to Russell Investment Group, Toronto.
In other major pension markets:
• U.K. pension funds gained a solid 10%, but the returns were about half that of 2005, when they chalked up an average 19.5%, according to WM Performance Services, Edinburgh. Contributing to the lower return were poor bond returns and currency exposure.
• Dutch pension fund returns were dragged down by negative bond returns. Dutch fund returns were estimated to be 7.2% in 2006, less than half of their 2005 performance of 14.7% in 2005, according to WM's office in Amsterdam.
• Japan fared the worst of the countries surveyed, with the average pension plan returning 5.3%, compared with 17.1% in 2005, according to Russell's Tokyo branch. Japanese funds were hurt by weak domestic stock market returns.