Global Institutional Pension Assets to Fall 16.7% in 2022 – Thinking Ahead Institute

“When you see corrections in stocks and bonds, as we saw last year, it will have a domino effect for pension funds,” she said.

While the drop may be due not only to a market correction but also to currency effects, capital markets will be “more significant,” she added.

Ms Hall noted that the pandemic, combined with loose monetary policy, has left governments forced to control inflation.

“This means that asset classes are under pressure, especially asset classes that require borrowing,” she said.

In 2022, share contributions fell to 42% from 45% compared to a year earlier. Bond charges fell to 32% from 34% in 2021.

Despite a difficult year, investors continued to invest in private markets and alternatives, which accounted for 23% of total investment compared to 19% in 2021. Cash increased to 3% from 2% a year earlier.

The Institute noted that since 2002, the total share of investments in shares has decreased from 50%, and the share in bonds has decreased from 38%.

Allocation to other assets such as real estate and other alternatives increased from 9% in 2002.

The seven largest markets — Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US — collectively still account for 91% of pension assets among the 22 markets included in the study.

For the year, dollar-denominated assets in the seven largest markets fell 17.1% year-on-year. In five years, assets grew at an annualized rate of 2.5%.

The US remains the largest pension market, followed by Japan and Canada. Together, these three markets account for over 76% of pension assets in the 22 largest pension markets.

The $30.43 trillion US pension funds alone make up 64% of the 22 markets. Assets are down from $35.01 trillion in 2021.

Also among the largest markets, the UK dropped to fourth place in 2022 behind the US, Japan and Canada. Due to the crisis caused by the liability-driven investment strategies used by UK pension funds, UK assets have fallen to $2.56 trillion in 2022 from $3.85 trillion in 2021.

“The UK has dropped to number four due to a liquidity crunch,” Ms Hall said. The September increase in interest rates in the UK forced UK pension funds to sell assets at a significant loss to meet liquidity needs caused by falling LDI values ​​using leveraged funds.

The Thinking Ahead Institute is a non-profit investment research group of institutional asset owners and asset managers led by Willis Towers Watson.

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