Most pension funds had a good year for returns in both equities and bonds in 2012, according to the latest Towers Watson Global Pension Assets Study, to be published today.

Australian superannuation assets rose from 96 per cent of GDP to 101 per cent, joining the Netherlands, Switzerland, the UK and US as the only other countries where pension assets totaled more than GDP. Towers calculated Australia’s pension pool at $US1.6 trillion (the adjustment to $US would have helped the stated size due to the strength of the $A during the year).

The top five pension fund markets are now: US, UK, Japan, Australia and Canada.

The study also shows a further shift in asset allocation by funds towards alternative assets, with Switzerland (30 per cent), and Australia and Canada (both 23 per cent) now having the highest allocations. Australia, which has the highest proportion of defined contribution versus defined benefit funds in the world, continues to have the highest allocation to equities (54 per cent) and the lowest to bonds (15 per cent). But Australia has the second highest home-country bias in equities, after the US, which has served the funds well in recent years.

Total institutional pension assets in the world’s major 13 markets grew by 9 per cent in 2012 to reach a record $US30 trillion.

Martin Goss, senior investment consultant at Towers in Australia, said: “During the past five years we have seen many funds deal with their governance shortfalls and, as a result, a growing number of funds have either more qualified people working on their investments or they have outsourced the running of all or part of their portfolios to third parties. In addition, pension funds are implementing investment strategies that are more flexible and adaptable and which contain a broader view of risk so as to make greater allowance for extreme events.”

In other highlights from the study: 

• The 10-year average growth rate of global pension assets (in local currency) is over 8 per cent
• All markets in the study have positive 10-year compound annual growth rate (CAGR) figures (in local currency)
• In terms of 10-year CAGR figures (in local currency terms), Hong Kong and Brazil have the highest growth of 14 per cent, followed by South Africa (13 per cent) and Australia (11 per cent). The lowest are Japan  (2 per cent), France (2 per cent) and Switzerland (4 per cent)
• 10-year figures (in local currency) show the UK and Netherlands have both grown their pension assets the most as a proportion of GDP, by 42 per cent to reach 112 per cent and 156 per cent of GDP respectively, followed by Australia (up 32 per cent to 101 per cent of GDP), the US (by 24 per cent to 108 per cent of GDP) and Hong Kong (up 23 per cent to 40 per cent of GDP). 
• During this time South Africa’s ratio of pension assets to GDP has fallen by 2 per cent to 64 per cent of GDP.