NEWS

Dutch pension schemes show relative conservatism

Dutch pension schemes have the highest allocation to bonds, with an average weighting of 48 per cent, while US and UK funds favour equities, according to the 2010 Towers Watson global pension assets study.

The study, which covers 13 pension markets with pension assets of an estimated $23 trillion, including Brazil and South Africa for the first time, analyses the growth, asset allocation and issues facing the world’s largest pension markets.

While total assets grew by 15 per cent in the year they are still below 2007 levels.

At the end of 2009 the average global asset allocation of the seven largest markets was 54.4 per cent equities, 26.9 per cent bonds, 1.3 per cent cash and 17.4 per cent in other assets, which includes property and alternatives.

Throughout the year the allocation to equities increased significantly from an average of 48 per cent to 54.4 per cent, and diversification into alternatives also continued.

The largest allocations to risky assets occur in the US, UK and Australia, with more conservative strategies adopted by the Netherlands, Switzerland and Japan.

Within the equities allocations the US still has the highest weighting to domestic equities with an average allocation of 43 per cent to domestic and 19 per cent to international equities; followed by Australia with 37 per cent domestic equities, and the UK with 29 per cent to domestic equities.

The UK has the highest allocation to international equities with 32 per cent, followed by Canada with 27 per cent.

Within bonds, the Netherlands allocates 41 per cent to domestic bonds while Japan also has a domestic bias with a 39 per cent allocation to Japanese bonds.

Switzerland and the Netherlands have the highest allocations to alternatives, which also includes property, with 29 and 24 per cent respectively.

While the US remains the largest market, pension fund assets in the US, Japan and the UK have decreased relative to other markets.

Brazil is the fastest growing followed by Hong Kong and Australia where growth rates over the past 10 years have been 18.8 per cent, 14 per cent and 13.9 per cent respectively.

Towers Watson Global Pension Study 2010
Country Assets Asset allocation DB/DC split
Equity bonds other cash
USD bn % % % % % %
US 13,196 61 19 20 45 55
Japan 3,152 36 55 7 2 99 1
UK 1,797 60 31 6 3 61 39
Canada 1,213 49 26 22 2 97 3
Australia 996 57 13 22 8 18 82