Global pension assets fell 16.7 per cent to US$47.9 trillion in 2022, driven largely by a correction in fixed income and equities markets, according to a new report by WTW’s Thinking Ahead Institute.
While the report found Canada’s pension asset values dropped by about 18 per cent in 2022, as of last August, it held roughly six per cent of global pension wealth, valued at US$2.88 trillion.
For the first time, Canada had the third largest share of global pension wealth, behind the U.S., where pension asset values declined 13 per cent to US$30.44 trillion, and Japan, which experienced a 15.8 per cent drop to US$3.01 trillion. The U.K. dropped to fourth place with a 33.4 per cent decline to US$2.57 trillion, largely due to pension funds’ struggles with liability-driven investing strategies last autumn.
The report also found pension investors are moving towards alternative investment allocations and away from public markets. Since 2002, overall equity allocations have shrunk from 50 per cent to 42 per cent in the seven largest pension markets. Similarly, allocations to bonds also decreased in these markets, from 38 per cent to 32 per cent. Allocations to real estate and other alternatives increased from nine per cent in 2002 to an estimated 23 per cent at the end of 2022.
The report also highlighted the decline in popularity of defined benefit pension plans in Canada, noting the total percentage of Canada’s pension assets held in defined contribution plans grew by three per cent last year, reaching 43 per cent.