Global assets in pension funds recorded their greatest drop since 2008 last year, falling by 16.7% in dollar terms to $47.9trn according to the Thinking Ahead Institute’s (TAI) annual Global Pension Assets Study.
“Last year we experienced, to an extent, a global polycrisis where various risks combined, were amplified as a result, and manifested in significant asset falls,” commented Marisa Hall, head of the TAI, a research outfit part of consultancy WTW.
The study’s conclusions are estimates based on index movements through 2022.
The steep fall in bond and equity indices over the year has brought pension assets back to levels last seen in 2019. Losses were largest in pension markets that are invested predominantly in long-term fixed income assets, which declined most in value over the course of 2022.
UK pension funds fared worst, recording losses of -22.2% in local currency terms and over 30% in dollar terms.
UK funds’ unusually large investment losses were mainly due to their liability-driven investing (LDI) strategies and the forced selling of Gilts during a liquidity crisis, the report noted.
The poor investment results made the UK pension market slide into the fourth spot globally, swapping places with Canada. The rest of the top-10 remained unchanged (see chart).
The seven largest pension markets ($bn)
Over the past 10 years, the UK also came bottom across the largest seven pension markets, which account for more than 90% of assets globally. The UK market is one of only two (together with Japan) that’s now smaller in dollar terms than in 2012.
By contrast, the US strengthened its position as the world’s leading pension market by almost doubling its assets to over $30trn by 2022, a compound annual growth rate of 6.1% despite a loss of -16.8% in 2022.
The US now accounts for 63.6% of global pension assets, its highest share ever, helped by a strong dollar which has appreciated against all other currencies since 2012.
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