$1.5 trillion wiped off pensions funds

Consulting firm Watson Wyatt has said up to $1.5 trillion (£753 billion) has been wiped off the value of global institutional pension fund assets since the start of 2008.

Roger Urwin of Watson Wyatt said with the average allocation to equities within pension funds in the 11 largest pension markets at 56%, they have felt the pain of the global equities market slump, while pension liabilities grew faster than their assets last year.

The 11 largest pension markets are Australia, Canada, France, Germany, Hong Kong, Ireland, Japan, the Netherlands, Switzerland, UK and United States, pension assets grew 9% to over $25 trillion last year.

Mr Urwin added 2007 was a year of 2 distinct halves, in the first 6 months, pension fund balance sheets continued to grow in strength, however, faltering markets in the second half of the year largely undid these gains. Severe market events in 2008 indicate that balance sheets will remain under pressure.

The firm added that the UK had the highest allocation to equities in 2007 at 64%while Switzerland had the lowest at 33%.

Throughout 2007, asset allocation into equities declined from 60% to 56% while money invested in bonds grew from 26% to 28%, as did the cash moved into alternative investments, such as commodities, hedge funds, private equity and real estate.

Mr Urwin concluded that 2007 saw a shift out of equities into bonds and alternatives, a trend which is expected to continue. However, funds still carry around a 20% overweighting to equities relative to global capital market opportunities.

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