Australia’s superannuation assets have experienced the highest growth rate of 14% per annum, when compared to the world’s thirteen largest pension markets over the 10 year period 2003 to 2013 according to the latest Towers Watson Global Pension Assets Study. It remains the world’s fourth largest pension market valued at US$1.6 trillion and, relative to GDP, Australia’s super assets rose 4% over the past year to 105% which is the fifth highest ratio in the study.
When compared to the world’s seven largest pension markets, Australia also has the highest proportion in defined contribution assets (84%) relative to defined benefit assets (16%), the second highest allocation to equities and alternatives at 54% and 25% respectively, and the lowest allocation to bonds at 13%.
Martin Goss, senior investment consultant for Towers Watson in Australia said: “The latest numbers in our Global Pension Assets Study illustrate the size and long-term growth of our Australian super system, which results from high levels of contributions (inflows) relative to pensions and other benefit payments (outflows) and relatively high growth-orientated investment strategies that have weathered the storm of the GFC. While our superannuation assets have not yet reached the size relative to GDP that exists in the Netherlands (170% of GDP), they remain greater than our annual GDP and are catching up to the levels achieved in the UK, Switzerland and the US (131%, 122%, and 113% of GDP, respectively).”
Global institutional pension fund assets in the 13 major markets grew by 9.5% during 2013 (compared to 6.9% in 2012) to reach a new high of almost US$32 trillion. The growth is the continuation of a trend which started in 2009 when assets grew 18%, and in sharp contrast to a 22% fall during 2008 when assets fell to around US$20 trillion. Global pension fund assets have now grown at over 6.7% on average per annum (in USD) since 2003.
The study reveals that the growth in assets helped to strengthen defined benefit pension fund balance sheets[1] globally during 2013. Furthermore, the ratio of global assets to global GDP is at its highest level since the research began. According to the study, pension assets now amount to around 83% of global GDP, a large rise from the 76% recorded in 2012 and substantially higher than the 57% recorded in 2008.
Martin Goss said: “During 2013 equities enjoyed their best calendar year of risk-adjusted return since the financial crisis and as a result pension funds in most markets are in the best shape they have been for many years. The global economic recovery continued to gain momentum throughout 2013, thanks to the absence of major negative events and a stream of positive economic news and after such a long period of financial retrenchment and uncertainty, this is all genuinely encouraging. Generally, pension funds are now implementing investment strategies that are more flexible and adaptable and which contain a broader view of risk so as to make greater allowance for the sort of extreme economic and market volatility they have experienced during the past five years. This is just as well because the global economic recovery – and the implied normalisation of market conditions – is by no means guaranteed.”
Leave a Comment
You must be logged in to post a comment.