Pension fund assets globally are forecast to reach $61.1 trillion in 2025 from $42.2 trillion in 2018, growing at a 5.4% compound annual rate boosted by Latin American assets, according to a report by PricewaterhouseCoopers Luxembourg and the Association of the Luxembourg Fund Industry.
Latin American pension fund assets are expected to grow at a compound annual rate of more than 12%, reaching $2.5 trillion by 2025.
The report also found that equity investments accounted for 38% of total pension fund's allocations at the end of 2018. Some 29% of assets was invested in bonds and 27% in alternatives.
Pension funds based in Asia-Pacific allocated 51% of its assets to equity at the end of December 2018, followed by 42% of North American asset owners, 26% of Latin American funds and 20% of European funds.
Overall, the report found there has been an increase in pension funds' foreign exposure since 2014, rising to 34% at the end of 2018 from 31%. Pension funds from the European region allocated 35% of assets to foreign markets, while APAC pension funds invested on average 38% of assets to external markets.
U.S. funds' level of foreign investment couldn't be readily determined, the report noted.
Latin American pension funds had the lowest allocation to foreign assets at 27% at the end of 2018.
North American pension funds hold 31% of their assets in alternatives, followed by Europe and APAC funds, which invest 27% and 8%, respectively, of their asset allocations in alternatives.
"In search for diversification, pension funds are not only looking in terms of asset class, but also geography," said Oliver Weber, head of asset and wealth management at PwC Luxembourg, in a news release. "They are going beyond their borders in search for growth — either through direct investments or, increasingly, using alternative investment funds."