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Global Pensions Update: Feb 2022

Pensions Recovery Offers Flexibility for Fully-Funded Schemes

Some pension funds enjoyed the returns on offer across markets in 2021, with many U.S. S&P 500 defined benefit (DB) schemes returning to fully funded status, their best funding levels since the global financial crisis of 2008/9. UK scheme funding levels seem to have remained largely static during 2021 with funding levels at around 92%, suggests Mercer, equating to a net deficit of £76 billion for FTSE 350 DB schemes. An environment of rising inflation and interest rate assumptions may prove unhelpful for some schemes, but it may be interesting to see what fully funded schemes do with new-found flexibility, opting perhaps to de-risk via buy-ins, or by choosing to re-allocate.

This collection of papers features some familiar favourites including the Thinking Ahead Institute's Global Pension Assets Study. An interesting paper from Robeco examines the implications of divesting from fossil fuels, something that may also be up for discussion at the PLSA's Virtual ESG Conference which is being held 9-10 March 2022. A paper from AEW argues the case for real estate allocations for those schemes which find themselves fully funded.

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Global Pension Assets Study 2022 (Thinking Ahead Institute)

Thinking Ahead Institute’s annual study of the major pension markets, covering almost $57 trillion in pension assets across 22 markets. 

2022 Corporate Pension Themes (BlackRock)

For compliance reasons, this paper is only accessible in certain geographies

BlackRock offers insights into the U.S. corporate pension world, noting that given the strong rebound from the Covid lows, the average plan is now almost fully funded – the highest level since the financial crisis of 2008/9. 

SWF and Public Pension Funds 2022: State-owned investors 3.0 (Global SWF)

Global SWF’s second Annual Report provides details on some of the world’s largest investors, those sovereign wealth funds and public pension funds, whose assets are estimated to exceed $31 trillion. 

The Implications of Divesting from Fossil Fuel Stocks (Robeco, Jan 2022)

This paper from Robeco considers the potential implications of divestment from fossil fuel industries, which they contend leaves funds vulnerable to both long-and short-term performance risk.

The Pivotal Role of Fixed Income Markets in the ESG Revolution (Pictet AM, 2022)

Pictet AM explores the crucial role that fixed income markets must play in the transition to net zero in the coming years. Innovative and intriguing new forms of financing are likely to appear, but over time, these may become mainstream investments in their own right.  

The Sustainability Yearbook 2022 (S&P Global)

S&P Global’s Sustainability Yearbook offers a comprehensive insight into corporate sustainability, while also offering a perspective on prospective environmental, social and governance issues. 

Defined Benefit Pensions Outlook – Q1 2022 (Invesco)

For compliance reasons, this paper is only accessible in certain geographies

Invesco investigates the funding status of UK DB schemes, noting that both assets and liabilities moved broadly in sync over the last quarter, with lower bond yields being slightly eclipsed by the returns from growth assets. 

Defined Contrarian Review (Redington, 2022)

This paper from Redington offers an insight into some of the issues facing UK Defined Contribution (DC) schemes. 

UK Pensions Quarterly (Sackers, 2022)

For compliance reasons, this paper is only accessible in the United Kingdom

This article from Sackers focuses on recent changes in pension law, regulatory issues, and pension reform. 

FTSE350 DB Pensions Analysis 2020 (Hymans Robertson)

For compliance reasons, this paper is only accessible in the United Kingdom

This Hymans Robertson report explores the environment for UK DB pensions in the light of the Covid pandemic – how recovery plans for schemes have been affected by changes to sponsor credit ratings, and how covenant risk might impact the end game for pension schemes. 

Allocating to Alternative Investments in U.S. DC Plans (DCIIA, 2022)

This paper explores the range and scope of alternatives held in U.S. Defined Contribution (DC) plans, ranging across Real Estate, Hedge Funds, and Private Equity. It also examines a number of the considerations and challenges associated with each asset class. 

U.S. Real Estate in a More Fully Funded U.S. Pension World (AEW, 2022)

For compliance reasons, this paper is only accessible in the United States

AEW argues the case for an allocation to real estate given that most U.S. Defined Benefit (DB) schemes are back to or above fully funded status.  

U.S. Corporate Pensions Annual Review and Preview 2022 (GSAM)

For compliance reasons, this paper is only accessible in the United States

GSAM presents their Annual Preview and Review, noting that many U.S. schemes are almost fully funded, while also highlighting potential changes to legislation that may remove barriers to the consideration of ESG factors by schemes.


Virtual Event 9-10 Mar 2022: PLSA ESG Conference

Join the PLSA’s upcoming virtual ESG conference to debate the consequences of COP26 for pension funds and their trustees, while gaining a better understanding of how to apply the proposals, as funds become a force for good in the transition towards a net zero environment.