According to the survey of the retirement-income systems in OECD and G20 countries [1], OECD pension fund assets reached USD 16.8 trillion in 2009. The US pension funds’ assets were worth of USD 9.6 trillion in 2009 those represented 57.1% of the total pension funds assets in OECD, the UK pension funds’ assets were worth USD 1.6 trillion, a 9.5% of the total. The other largest pension funds belonged to Japan with estimated assets worth of USD 1 trillion, the Netherlands - USD 1 trillion, Australia - USD 0.8 trillion and Canada - USD 0.8 trillion. The survey disclosed that in 2008 OECD pension funds experienced on average a negative return of 22.5% in real terms, equivalent to USD 3.5 trillion. Losses made in 2008 were recovered by around USD 1.5 trillion during 2009. More information about the investment performance of pension funds and public pension reserve funds in selected OECD countries during the period of 2008-2009 is available in the Picture 1 and Picture 2.
Pension funds' real net investment return in selected OECD countries, 2008-2009 (%)
PPRFs’ real net investment return in selected OECD countries, 2008-2009 (%)
1. There are five Swedish National Pension Funds (AP1-AP4 and AP6). | ||||
2. 2009 data refer to fiscal year 2010 ending March 31, 2010. | ||||
3. AGIRC and ARRCO are unfunded mandatory supplementary plans for white-collar and blue-collar workers respectively, with reserves. More information on these plans can be found in the OECD Private Pensions Outlook 2008. | ||||
4. Data refer to June of each year. | ||||
5. 2009 data refer to the period January-March 2010. | ||||
Source: OECD Global Pension Statistics. | ||||
The research also revealed the information about the allocation of pension funds’ and public pension reserve funds’ assets in selected OECD countries in 2009. According to the survey bonds and equities remained the two most important asset classes, accounted for over 80% of total pension funds’ portfolio in nine OECD countries at the end of 2009. The proportions of different asset classes allocated by pension funds in selected OECD countries provided in Picture 3 and Picture 4.
Pension funds' asset allocation for selected investment categories in selected OECD countries, 2009 (As a % of total investment)
Note: The GPS database provides information about investments in mutual funds and the look-through mutual fund investments in cash and deposits, bills and bonds, shares and other. When the look-through was not provided by the countries, estimates were made based on asset allocation data for open-end companies (mutual funds) from the OECD Institutional Investors' database. Therefore, asset allocation data in this Figure include both direct investment in shares, bills and bonds and cash and indirect investment through mutual funds.
1. The "Other" category includes loans, land and buildings, unallocated insurance contracts, private investment funds, other mutual funds (i.e. not invested in cash, bills and bonds or shares) and other investments. | ||
2. Data refer to 2008. | ||
3. The high value for the "Other" category is mainly driven by land and buildings (11%) and other mutual funds (8%). | ||
4. The high value for the "Other" category is mainly driven by outward investments in securities (26%), for which the split between various securities is not available. | ||
5. The high value of the "Other" catoegory is mainly driven by unallocated insurance contracts (22%). | ||
6. The "Shares" category includes all mutual funds' investments, as the split between various securities is not available. | ||
7. The high value for the "Other" category is mainly driven by loans (30%) and other mutual funds (16%). | ||
8. The high value for the "Other" category is mainly driven by private investment funds (46%). | ||
Source: OECD Global Pension Statistics. | ||
Picture 3. Pension funds' asset allocation for selected investment categories in selected OECD countries, 2009[4]
Public pension reserve funds' asset allocation for selected investment categories in selected OECD countries, 2009 (As a % of total investment)
| 1. The "Other" category includes structured products, land and buildings, private investment funds, loans, unallocated insurance contracts, and other investments. | <><><><><><>
| 2. The high value for the "Other" category is mainly driven by private investment funds (17%). | <><><><><><>
| 3. Data refer to June 2009. The high value for the "Other" category is mainly driven by private investment funds (27%). | <><><><><><>
| Source: OECD Global Pension Statistics. | <><><><><><>
Picture 4. OECD Pensions at a Glance, Retirenment-income Systems in OECD and G20 Countries, 17 March 2011[5]
Analyzing assets allocation portfolios, the survey of investment regulation of pension funds [6] which contains information about quantitative portfolio restrictions applied to pension funds in OECD and selected non-OECD countries as of December 2010, revealed that Belgium, Germany Pensionsfonds, Luxembourg’s savings companies with variable capital (SEPCAVs) and pension savings associations (ASSEPs), Netherlands had the most flexible rules to select assets for the investment portfolio. Countries mentioned above do not have portfolio limits on pension funds in equity, real estate, bonds, retail investment funds, private investment funds, loans or bank deposits and only some restrictions are applied in Australia, Canada, Ireland, United Kingdom and United States.
Even though everyone has got the same objectives to preserve savings and grow portfolio of assets, the assets allocated in pension funds and returns during the period of 2008 - 2009 are a clear illustration how much savings for the future comfort depend on the market conditions. If returns from liability matching assets, id est bonds, credit, swaps and cash collaterals are below the inflation rates and gains are equally expected as losses from the investment in equities and high yield debts those value related to the markets state, and furthermore, if perfect diversification is equal to zero, how effective is management of savings and how practical pension funds’ reliance on markets’ growth?
The answer regarding the growth of closed financial systems may be the following – the growth of the system is possible as much as it could be inflated until it burst, as long as we keep on persuading that the financial system with a constant amount of money is the system without limits.
[1] OECD Pensions at a Glance, Retirenment-income Systems in OECD and G20 Countries, 17 March 2011
http://www.oecd-ilibrary.org/finance-and-investment/pensions-at-a-glance-2011_pension_glance-2011-en
[2] OECD Pensions at a Glance, Retirenment-income Systems in OECD and G20 Countries, 17 March 2011
[3] OECD Pensions at a Glance, Retirenment-income Systems in OECD and G20 Countries, 17 March 2011
[4] OECD Pensions at a Glance, Retirenment-income Systems in OECD and G20 Countries, 17 March 2011 http://dx.doi.org/10.1787/888932371215
[5] OECD Pensions at a Glance, Retirenment-income Systems in OECD and G20 Countries, 17 March 2011 http://dx.doi.org/10.1787/888932371215
[6] OECD Survey of Investment Regulation of Pension Funds, June 2011
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