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Global Pension Assets Hit $23 Trillion Mark
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Reuters reports that Global pension funds return to stocks in 2009:
Recovering
share prices attracted pension funds in 2009, reversing a trend in
favour of bonds in the wake of the credit crisis, a study by consultant
Towers Watson said.Pension
schemes allocated 54.4 percent of their assets to equities last year up
from 48 percent in 2008, with the UK, United States, Australia and
Canada investing above this average level, the study said.
British pension funds, however, have steadily cut their exposure to equities, to 60 percent in 2009 from 77 percent in 1999.
Investments in bonds decreased to 26.9 percent from 32.1 percent in
2008, bucking a trend which saw pension funds' allocations to this
asset class grow from 24.5 percent in 2005.
As well as returning to higher risk assets, pension funds broadened
their investment horizons to improve diversification, with allocations
to real estate in particular and to a lesser extent hedge funds,
private equity and commodities, growing to 17 percent from 12 percent
in the last five years, the study said.
Swiss and Dutch pension schemes had the largest allocation to alternative assets, such as property.
Global
institutional pension fund assets in the major markets increased by 15
percent to over $23 trillion in 2009, but that did not make up for the
21 percent losses in 2008.
"In order to get back on track, (schemes) will be reviewing all
options, including extra contributions from sponsors, contingent
funding arrangements, investment strategy reviews," said Roger Urwin,
global head of investment content at Towers Watson.
In her article in the Telegraph, Rachel Cooper reports Pension assets hit $23 trillion mark:
Asset
values increased to more than $23 trillion (£14 trillion) during 2009,
according to a study by Towers Watson, while pension balance sheets
strengthened by 10pc compared to a 25pc slide in 2008.
During
the financial crisis of 2008, asset values tumbled by 21pc, but Towers
Watson said that last year's spike had brought assets in the 13 major
markets back to 2006 levels.
Despite losing market share
during the last decade, the UK remains one of the largest pension
markets, accounting for 8pc of total global pension fund assets, while
the US and Japan remain the biggest markets accounting for 57pc and
14pc respectively.
Pension assets now amount to 70pc of the average global gross domestic product, down from 76pc a decade earlier.
Roger Urwin of Towers Watson said the financial crisis had been a "huge
wake-up call", but warned that "problems of poor systemic design in the
industry" increased the chance of further periods of financial
distress. He added that recovery in the markets should not "stifle
recognition" of these problems as major issues to address, adding that
"without exceptional leadership", pensions and investments faced
"another tough decade".
Roger Urwin is absolutely
right. There are serious structural gaps plaguing the pension industry,
the least of which is how to properly align the interests of
stakeholders with pension fund managers who take increasingly riskier
bets to meet unrealistic actuarial rates of return.
In order
to meet these return targets, pensions are now leveraging up, buying
more private market assets or investing directly into hedge funds
(essentially loading up on more leverage). When times are good, these
bets pay off, stakeholders are happy, and pension fund managers get to
reap huge bonuses (even if it's all just leveraged beta).
However,
when disaster strikes, leverage kicks in on the opposite end, hitting
these pension funds hard. Those who were most exposed to stocks,
illiquid asset classes and illiquid instruments were the ones that got
hit the hardest in 2008.
But for now, that $23 trillion is being
invested in all sorts of liquid and illiquid risks assets. How long
will this last? As long as the liquidity rally keeps going and markets
keep grinding higher. There is a symbiotic relationship between pension
funds, hedge funds, and private equity funds that drives these
liquidity rallies for a lot longer than most skeptics think.
As long as the music keeps playing, everyone is happy. But when the tide shifts, as it inexorably will, watch out below, those that took the stupidest risks will be the first to succumb to the market's wrath.
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The assets may be 23 trillion but what about the liabilities. I bet they are at least 30 trillion!
Excellent point Frank. We only see one side of the coin.
BUY SOLARS BUY SOLARS BUY SOLARS, when they release the jobs report this friday!
Feb. 3 (Bloomberg Multimedia) -- The U.S. may lose 824,000 jobs when the government releases its annual revision to employment data on Feb. 5, showing the labor market was in worse shape during the recession than known at the time.
OOPSSSSSSSSSSSSSSSS
The sun is going down on the solars and the market, another leg down due any minute.
Really? Why is that? Enlighten us all with technical analysis 101. Solars are one of the few secular bull markets out there, which is why I accumulate them on every major dip. If I am wrong, fine, but this is where I see the future.
Its called selling Leo, the solars are having a serious correction just like the major averages. Your next major dip is right around the corner, have some patience it just started.
I respectfully disagree. Everyone is expecting a major correction, which is why it won't happen.
Its here now, I don't know what you are looking at.
Pensions in stocks and oligarchs in commodities. Let the games begin!
What were pension assets in 2006 & 2007?
If I remember correctly, they peaked in 2007 at $27 trillion.
I was kicking this around with some friends last week - so Leo, thanks for posting this item.
I'm going to guess that the actual cash-out-value of what's sitting in pension plans everywhere is less than 68% of what's shown on the books. (not related to the fact they are all underfunded to begin with)
Pension Plans and Health Care costs are two things that are hard to kick down the road - this wreck is coming full speed at us. Tax payers will be especially hard hit by all the public sector workers on great pensions and with not enough in the pot to pay them. If you don't own property - don't buy any - the property owner will be seen as the last cash-cow to pay police, fire, teacher etc pensions.
Agreed, but the Pensioners are in the same boat as the SS recipents.
Just today, announced the tax reveues from the SS funds, used to pay for them ,and other Gv't liabilities for the FIRST time will not cover JUST the SS Payouts.
A 29 Billion shortfall. If these monies were in Bonds, or Treasuries, since inception, there would be trillions in the fund.
Never understood it, WHY Gv't did not make it a capital offense to make these funds available for IOU's and theft.
Pensions, not mandated to be 100% vested, and untouchable.
Especially when the two were funded by the people who were to recieve the monies upon retirement.
Go to a FDIC insured Bank, rob a teller, ask for $100.00......wait for the cops,surrender.
You will be sentenced to 10-15yrs, no parole.( you messed with the FR NOTES).
If your a Pol, you steal millions, take bribes, and screw the people.......you get rich, and re-elected.
Justice.............yeah.
Everything we were taught to be right, and correct, has been turned upside down..............Bizzzaro World.
$23T on paper.
A fool and his pension are soon parted!
Ardent spenders of OPM (other people's money) are no doubt salivating as we speak....
Yummy! Lets buy all the bills, notes and bonds that we can with this money!
Start up the ovens for the complainers!