Global pension assets on the up – Swiss pension assets grew by 15.8% in 2019

According to the latest figures from the Global Pension Assets Study by the Thinking Ahead Institute, global institutional pension fund assets in the 22 largest markets (the "P22") bounced back in 2019, up 15% to US$46.7 trillion.

Switzerland’s pension assets grew by 15.8% in 2019 - well ahead of its ten-year compound annual growth rate of just 5.4% p.a. - to reach an estimated CHF 1’080bn (US$1’047 bn). The growth recovery was driven, in part, by strong gains in equity markets during the year. This represents a significant swing in fortunes from 2018, which saw an overall 3.3% 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% of the P22, marginally higher than the previous year. The US also remains the largest pension market, representing 62% of worldwide pension assets, followed by the UK and Japan with 7.4% and 7.2% respectively. Switzerland is ranked seventh with 2.2% of world pension assets.

Shift to alternative assets, well-balanced Swiss schemes

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% of P7 pension fund assets were allocated to private markets and other alternatives, compared to nearly a quarter of assets (23%) in 2019. This shift comes largely at the expense of equities and bonds, down 16% and 1% respectively, in the period. The average P7 asset allocation is now equities 45%, bonds 29%, alternatives 23% and cash 3%.

Michael Valentine, Senior Investment Consultant at Willis Towers Watson, Switzerland said: “While the 2019 results are highly positive these are clearly not sustainable levels of performance over the longer term. The markets continue to benefit from certain, one-off tail winds, notably the unprecedented levels of debt and so future gains are effectively being ‘pre-booked’. By global standards the Swiss schemes are well balanced, with a broadly equal weighting to each of equities, bonds and alternatives (including property). Nevertheless, each of these categories poses its own set of risks and so we continue to advocate incremental improvements to diversification both within and across strategic asset classes.”

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 specialisation 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.”

Other highlights from the study include:

Global asset data for the P22 in 2019

• The US (62.5%) continues to be the largest market in terms of pension assets, followed by the UK and Japan with 7.4% and 7.2% respectively.
• Total pensions assets to GDP ratio was 68.8% at the end of 2019
• The Netherlands continues to have the highest ratio of pension assets to GDP (187%) followed by Australia (151%) and Switzerland (146%).
• Estimated five-year growth rates (in local currency) range from -0.6% per annum in France to 15.2% in India.
• The US continues to hold the largest weighting (62.5%) within the P22; while the weights of Hong Kong and South Korea marginally increased relative to the other markets in the study, over the past ten years.
• Ten-year figures (in local currency) show the Netherlands grew its pension assets the most as a proportion of GDP by 73 percentage points (pp) to reach 187%, followed by Australia (41pp to 151%), the US (41pp to 136%), Switzerland (40pp to 146%) and the UK (39pp to 126%).

Asset Allocation for the P7

• Equities allocations for the P7 markets have decreased by 16 percentage points in aggregate during the past 20 years (61% to 45%), which funded the corresponding increased allocation to alternative assets.
• Allocations to bonds remained broadly unchanged in P7 markets, down 1 percentage point to 29%.
• The home bias towards equities has fallen, on average, with the weighting down to 39.7% in 2019 from 68.6% in 1999.

Notes to editors:

• The P22 refers to the 22 largest pension markets included in the study which are Australia, Brazil, Canada, Chile, China, Finland, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, South Africa, South Korea, Spain, Switzerland, the UK and the US.
• The P7 refers to the seven largest pension markets (92% of total assets in the study): Australia, Canada, Japan, Netherlands, Switzerland, UK and US.
• All figures are rounded and 2019 figures are estimates.
• All dates refer to the calendar end of that year.

About the Thinking Ahead Institute

The Thinking Ahead Institute is a global not-for-profit member organisation whose aim is to influence change in the investment world for the benefit of savers. The Institute’s members comprise asset owners, investment managers and other groups that are motivated to influence the industry for the good of savers worldwide. It is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group.