GLOBAL – Watson Wyatt says global institutional pension fund assets fell by 12% to 1.4 trillion dollars in 2002, leaving many pension funds in the “difficult predicament” of facing pressure to get their balance sheets back in shape.
“In 2002, total institutional pension fund assets of the 11 major markets fell by approximately 1.4 trillion, or 12%,” pension consultant Watson Wyatt said, “leaving funds with 10.7 trillion dollars of assets under management, the same level as five years ago.”
“This is the third consecutive year of losses and to make matters worse, liability growth has accelerated amid falling bond yields,” said the firm’s head of investment practice Roger Urwin. “Taking into consideration the increase in values to liabilities, global pension fund balance sheets worsened by a figure over 20%.”
“Many funds worldwide are in difficult predicaments,” Urwin said. “They have experienced a rapid deterioration in their balance sheets, and where deficiencies exists they will be pressed either by statutory force or by industry pressure to put their funds into better shape.”
Watson Wyatt’s annual survey of pension fund assets found that pension fund assets rose by around 74% in the last 10 years – an annual rate of growth of 6%. But assets are now 2.8 trillion dollars off their 1999 peak of 13.5 trillion due to poor stock markets.
The firm found that there is “some evidence of an emerging convergence” of asset class allocations with the UK, Ireland and Hong Kong reducing their equity holdings. At the same time, more traditionally fixed income-biased countries in continental Europe have raised their equity allocations. “Recent changes have been converging equity allocations towards the 50%-60% range,” Urwin said.