The outstripping of DB by DCplans isn't the only change a Willis Towers Watson study found.(Photo: Shutterstock)

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The growth rate for defined contribution assets has increased whilethat of defined benefit assets has decreased, according to theGlobal Pension Assets Study from Willis TowersWatson's Thinking Ahead Institute.

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It found that assets in global institutional pension funds inthe 22 major markets  dropped 3.3 percent over the courseof the year in 2018, hitting $40.1 trillion at year end.

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And defined contribution assets, the report said,account for more than half of total assets across the seven largestpension markets for the first time.

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But it also found that, growth of defined contribution plansnotwithstanding, DC plans are “still weakly designed, untidilyexecuted and poorly appreciated. …”

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So even though DC assets have grown at a faster pace thandefined benefit plans over the past 10 years—the former at 8.9percent and the latter at 4.6 percent—the report adds, “it willtake better design and engagement models to create meaningfulcontributions to retirement security.”

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The outstripping of DB by DC plans isn't the only change; Assetallocation has moved away from equities since 1998, falling 20percentage points, with investments in other assets rising 19percentage points during the same time period.

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Still, at 47 percent and 43 percent respectively, the U.S. andAustralia have higher allocations to equities than the rest of theP7 markets (the seven largest markets for pension assets:Australia, Canada, Japan, the Netherlands, Switzerland, the U.K.and the U.S.), while the Netherlands, the U.K. and Japan have aboveaverage exposure to bonds and Switzerland has the most evenallocations across equities, bonds and other assets.

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The U.S. is still the largest pension market, representing 61.5percent of worldwide pension assets. The two next largest marketsare Japan, at 7.7 percent, and the U.K., at 7.1 percent.

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The report also says that private markets saved the 2018 resultsfrom being much worse for the P7 (already the worst in the last 20years); in fact, it says, private markets, “given their 20 percentor so allocation and with their positive returns[,] … producedimportant risk diversification.”

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Over the next 5–10 years, it adds, pension funds will have toconsider a range of issues that include a continued move to DC; abigger impact from evolved regulations; challenges in governanceissues; strategy changes to incorporate sustainability, ESG,stewardship and long-horizon investing; and the rise of technologyand the changes it will bring about.

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READ MORE:

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Funded status of U.S. corporate pensions slipped in2018: study

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Union pensions: Will Congress kick the can on asolution?

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