GLOBAL - Pension fund assets in most OECD countries have climbed back above the level managed at the end of 2007, with economic and financial indicators showing signs of further recovery in 2010, according to the latest OECD Pension Markets in Focus report.
However, the outlook for future economic growth in developed economies remains uncertain and sluggish, and some countries have yet to recover completely from the losses of 2008.
In Belgium, for example, assets at the end of 2010 were 10% below the December 2007 level. Ireland (13%), Portugal (12%), Japan (8%), Spain (3%) and the US (3%) also showed shortfalls relative to 2007.
On average, pension funds experienced a positive net return on investment of 2.7% in real terms and 4.3% in nominal terms in 2010.
The best performing pension funds among OECD countries were in New Zealand, with a real return of 10.3%, Chile (10%), Finland (8.9%), Canada (8.5%) and Poland (7.7%).
But in Portugal and Greece, pension funds experienced, on average, a negative rate of investment returns - -8.1% and -7.4%, respectively.
Until December 2010, pension funds in OECD countries overall had recovered $3trn (€2.1trn) from the $3.4trn in market value they lost in 2008.
The OECD weighted average asset-to-GDP ratio for pension funds also increased from 68% of GDP in 2009 to 71.6% of GDP in 2010.
The US saw an increase of 5 percentage points in the value of its asset-to-GDP ratio in 2010, equivalent to a gain of $1trn in assets, from $9.6trn to $10.6trn.
Bonds remained by far the dominant asset class, accounting for 50% of total assets on average, suggesting an overall conservative stance.
However, countries like the US, Australia, Finland and Chile showed significant portfolio allocations to equities, ranging from 40% to 50%.
In Austria, Finland, Poland and the Netherlands, the weight of equities in portfolios increased substantially from 2009 to 2010 - in the range of 6 to 7 percentage points - while bond allocation fell by a similar amount.
According to the report, public pension reserve funds (PPRFs) continued their steady growth throughout 2010. By the end of the year, the total amount of PPRF assets within OECD countries was equivalent to $4.8trn, compared with $4.6trn in 2009.
Although most PPRFs performed positively in 2010, investment returns were lower than in 2009. PPRFs in countries that submitted data continued to regain the ground lost during the 2008 financial crisis, with positive investment returns over the 2008-10 period, reaching 2.6% in real terms and 4.4% in nominal terms on average.
The funds with conservative investment portfolios are still ahead in terms of performance for that period.