Global institutional pension fund assets in the 22 largest major markets (the P22) bounced back in 2019, soaring by 15 percent to US$46.7 trillion at year end, according to the latest figures in the Thinking Ahead Institute's Global Pension Assets Study.

The growth recovery was driven, in part, by strong gains in equity markets during the year with Mexico (22.2 percent), Canada (18.9 percent) and the US (17.8 percent) leading the way. This represents a significant swing in fortunes from 2018, which saw an overall 3.3 percent decline in global pension assets.

The seven largest markets for pension assets (the P7) – Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US – account for 92 percent of the P22, marginally higher than the previous year. The US also remains the largest pension market, representing 62 percent of worldwide pension assets, followed by the UK and Japan with 7.4 percent and 7.2 percent respectively.

The research also shows the shift to alternative assets continues apace and marks two decades of considerable change in pension fund asset allocation globally. In 1999, just 6 percent of P7 pension fund assets were allocated to private markets and other alternatives, compared to nearly a quarter of assets (23 percent) in 2019. This shift comes largely at the expense of equities and bonds, down 16 percent and 1 percent respectively, in the period. The average P7 asset allocation is now equities 45 percent, bonds 29 percent, alternatives 23 percent and cash 3 percent.

Marisa Hall, Co-Head of the Thinking Ahead Institute, said: "Besides strong growth in assets last year, there was a noticeable pick-up in the decade-long trend of funds developing stronger strategies around their people. Larger funds, particularly those above US$25 billion, continued to build larger and more sophisticated internal teams, with stronger leadership through CEO and CIO roles and greater role specialization in certain asset classes, such as private markets. Smaller funds are continuing to outsource all or part of their CIO-type decisions and we expect this to continue."

According to the research, total DC assets continue to grow, representing slightly over 50 percent of total P7 pension assets. Last year DC exceeded defined benefit (DB) assets for the first time, a culmination of ten years of faster DC assets growth than DB (8.4 percent vs 4.8 percent pa), reflecting increased member coverage and, in some markets, higher contributions.

Marisa Hall said: "The DC market has retained its newly-found position as the larger of the two, as DB assets grow at a far slower pace. But the challenge of member engagement, critical for a stronger DC system, remains an unresolved issue for many schemes. As such, we expect this to be an area of particular focus for leading DC organizations as the next generation of plans takes shape. Advances in technology are opening up new possibilities for customization, changing the nature of member interactions and re-setting member expectations. The future of DC is likely to be hyper-customized, with increased focus on individual participants, but many schemes need to improve their governance to fully embrace this."

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Global institutional pension fund assets in the 22 largest major markets (the P22) bounced back in 2019, soaring by 15 percent to US$46.7 trillion at year end, according to the latest figures in the Thinking Ahead Institute's Global Pension Assets Study.

The growth recovery was driven, in part, by strong gains in equity markets during the year with Mexico (22.2 percent), Canada (18.9 percent) and the US (17.8 percent) leading the way. This represents a significant swing in fortunes from 2018, which saw an overall 3.3 percent decline in global pension assets.

The seven largest markets for pension assets (the P7) – Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US – account for 92 percent of the P22, marginally higher than the previous year. The US also remains the largest pension market, representing 62 percent of worldwide pension assets, followed by the UK and Japan with 7.4 percent and 7.2 percent respectively.

The research also shows the shift to alternative assets continues apace and marks two decades of considerable change in pension fund asset allocation globally. In 1999, just 6 percent of P7 pension fund assets were allocated to private markets and other alternatives, compared to nearly a quarter of assets (23 percent) in 2019. This shift comes largely at the expense of equities and bonds, down 16 percent and 1 percent respectively, in the period. The average P7 asset allocation is now equities 45 percent, bonds 29 percent, alternatives 23 percent and cash 3 percent.

Marisa Hall, Co-Head of the Thinking Ahead Institute, said: "Besides strong growth in assets last year, there was a noticeable pick-up in the decade-long trend of funds developing stronger strategies around their people. Larger funds, particularly those above US$25 billion, continued to build larger and more sophisticated internal teams, with stronger leadership through CEO and CIO roles and greater role specialization in certain asset classes, such as private markets. Smaller funds are continuing to outsource all or part of their CIO-type decisions and we expect this to continue."

According to the research, total DC assets continue to grow, representing slightly over 50 percent of total P7 pension assets. Last year DC exceeded defined benefit (DB) assets for the first time, a culmination of ten years of faster DC assets growth than DB (8.4 percent vs 4.8 percent pa), reflecting increased member coverage and, in some markets, higher contributions.

Marisa Hall said: "The DC market has retained its newly-found position as the larger of the two, as DB assets grow at a far slower pace. But the challenge of member engagement, critical for a stronger DC system, remains an unresolved issue for many schemes. As such, we expect this to be an area of particular focus for leading DC organizations as the next generation of plans takes shape. Advances in technology are opening up new possibilities for customization, changing the nature of member interactions and re-setting member expectations. The future of DC is likely to be hyper-customized, with increased focus on individual participants, but many schemes need to improve their governance to fully embrace this."