Pension Funds Would Benefit From Overseas Adventures

The world’s pension funds are growing as an ageing population puts more money aside to pay for retirement. The global total has doubled in the past decade to almost $57 trillion. But the biggest pool of savings risks missing out on both diversification and returns by restricting its investments to its domestic markets.

U.S.-based pension funds are the biggest in the world with about $35 trillion of assets, according to a study just released by consultants Willis Towers Watson Plc. That’s almost 10 times the size of second-placed U.K. with $3.86 trillion and Japan’s $3.7 trillion, according to the report. Canada, Australia, the Netherlands and Switzerland round out the global top seven for a combined total of $52 trillion.

In the past 20 years, those pension funds have altered their asset mix. The role of equities has diminished, dropping to 45% of holdings last year from more than 60% in 2001, the study says. Alternative assets, including real estate, have grown to account for about a fifth of investments, up from 5% two decades ago.