Australia is the 5th biggest pension fund market

Australia has had the highest-rate of growth in pension fund assets among so-called developed countries, says Towers Watson.

In the last 10 years superannuation assets have increased 17 per cent per annum in Australia, says the consultants.

The country is the world’s fifth-biggest pension fund market with US$1.3 trillion in assets. The size of Australia’s pension assets are behind that of the U.S., Japan, the U.K. and Canada.

“I expect Australia to be among the fastest-growing developed markets,” says Graeme Miller, director of investment services, Australia for Towers Watson.

“There will be emerging markets such as Brazil, South Africa and Hong Kong that will be faster growing,” says Miller.

Australia’s mandatory superannuation system is about 20 years old. The growth of assets has been enormous as the country has caught up in terms of assets under management with the pension systems of members of the Organisation of Economic Co-operation and Development, so-called developed countries.

Australian superannuation funds continue to put on average half their assets into stocks and 18 per cent into bonds, 24 per cent in infrastructure, real estate, hedge funds and private equity and 8 per cent is invested in cash.

The popularity of stocks in the portfolio of Australia’s superannuation funds is because of its defined contribution system. Defined benefits systems tend to put most of their money in bonds.

“For the foreseeable future equities will continue to be a dominant asset in super funds’ growth portfolios,” says Miller.

“We will continue to see the trend of funds to diversify into other growth assets,” he says.