Worldwide pension fund investment returns in 2010 were positive for the second year running, after double-digit losses in 2008.
Still, last year's gains overall were not as strong as the previous year.
Average returns at U.S. pension plans of about 14% — driven by rising equity markets — again led the pack of large pension markets worldwide in the year ended Dec. 31. In 2009, U.S. plans returned 19.6%.
Similarly in the U.K., equities drove average pension fund returns to 12.8% for calendar 2010, down from 14.5% in 2009.
Canadian plans, helped by a strong domestic stock market, returned 10%, down from 13.8% a year before.
Currency movements crushed returns in Australia, Japan and Switzerland, however, where the Aussie dollar, yen and Swiss franc strengthened by as much as 22% against other major currencies. Aussie retirement funds returned 3.5%, while Japanese and Swiss funds saw increases of 1.1% and 2.8%, respectively. Those returns were down from 14%, 9.7% and 10.8%, respectively, in 2009.
Investment returns were calculated in various ways, typically by using actual performance data for most of the year plus an estimate based on asset allocations and index returns for the remaining portion.
Dutch pension fund returns, typically included in this report, were not available this year because conclusive data were not ready.
Median returns for U.S. corporate and public pension funds for the year were 13.7% and 13.6% respectively, according to the Northern Trust Universe, which tracks performance of 300 large plans with a combined value of approximately $630 billion. Median U.S. equity performance within the universe was 18.3%.
A BNY Mellon Asset Servicing estimate based on 11 months of actual data plus a December estimate shows full-year average returns of 14.3% for all U.S. funds. As of Sept. 30, the asset allocation of the BNY Mellon Master Trust Universe was 32% U.S. stocks, 28% U.S. bonds, 17% international stocks, 10% alternatives, 8% other (including real assets, balanced mandates, etc.), 2% each for international bonds and real estate and 1% cash.
Gregory Stewart, Pittsburgh-based managing director, global product management, at BNY Mellon Asset Servicing, noted that asset allocations hardly budged in 2010. “The concept of derisking is definitely on our clients' minds, (however) I don't know the data itself would point to that,” Mr. Stewart said.
Despite poor equity returns over the past decade, “there's a school of thought that says that, longer term, equities remain a strong source of return,” he said. He added that some funds might not yet have conducted asset-liability studies since the crisis, and that it is “possible that some of these (asset allocation) decisions have yet to be made.”