FSC releases a Mercer Report on asset allocations of superannuation and pension funds from around the world

New research for the Financial Services Council by Mercer has benchmarked Australia’s asset allocation for superannuation against 11 other comparable private pension schemes around the world.

The countries included in the report include: Australia, Canada, Chile, China, Denmark, Hong Kong, Japan, South Korea, Netherlands, Switzerland, the UK and the USA. The FSC stated it is the first research of its type to make these comparisons.

The Report found that four of the five largest pension systems in the world − Canada, the USA, UK and Australia – have invested 35 to 50 per cent of their assets in equities. As the world’s fourth largest superannuation system, Australian funds had 50 per cent of assets invested in equities and the highest overall exposure to growth assets at 68%.

The FSC concluded from the Report that the Australian superannuation system remains exposed to a diverse range of asset classes.  The accepted reasons for the high exposure in Australia to equities includes:

  • Defined Benefit Schemes: The lower exposure in Australia to defined benefit schemes. Many of the other countries reviewed have a high number of guaranteed pensions or annuities which require matching assets. They are therefore more heavily weighted towards bonds or fixed income.
  • Demographics: Australia has a higher ratio of younger to older fund members than other countries so it is appropriate that a scheme with a younger demographic invests more heavily in growth assets.
  • Local Bond Market: Our small bond market combined with home country bias, manifests itself in higher allocation to equities.

A copy of the Mercer Report is available here: http://www.fsc.org.au/downloads/uploaded/2014_0226_Mercer%20Report%20for%20FSC_asset%20allocation%20Feb%2014_9374.pdf

 

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