Global institutional pension assets set a new record in 2021, hitting $56.6 trillion by the end of the year across the 22 largest markets, according to research released Wednesday by London’s Thinking Ahead Institute.
In the largest markets, 54% of those assets are in defined contribution funds, according to the study.
Total pension assets at the end of 2021 were up 6.9% from a year earlier, when they first topped $50 trillion, and nearly double to 29,300. billion dollars measured in 2011.
The seven largest markets – Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US – collectively account for 92% of pension assets in the 22 markets. The $35 trillion in US retirement funds alone account for 62% of the 22, up from 52% in 2011, according to the study.
Among the 22 largest markets, the UK came second after the US, a ranking previously held by Japan, where total assets fell 1.1% in 2021.
Pension assets rose 11.6% in Australia, 8.5% in the US and 7.7% in the UK from a year earlier, according to the study.
The study also found that pension assets far exceed economic growth in the countries studied. Over the past 10 years, the ratio of assets to gross domestic product has increased in particular in the Netherlands, Australia, Switzerland and the United States
The Thinking Ahead Institute is a not-for-profit investment research group of institutional asset owners and asset managers managed by Willis Towers Watson.
The Institute’s co-director, Marisa Hall, said in a press release that “pensions are becoming increasingly better funded in many countries, but have also been subject to the growth in value of financial markets.”
These lofty valuations “raise difficult questions about future allocations” and could encourage pension fund managers to continue to look beyond traditional asset classes to hold onto higher yields, Ms Hall said.
“Pension professionals are also facing structural change, with defined contribution funds appearing to be the future in most global pension markets, regulatory pressure and a growing demand from end savers for easy access to information and an openness about investment decisions,” Ms Hall said.