Bloomberg News

Global Pensions Reduce Bond Holdings in 2013, Towers Watson Says

February 05, 2014

Global pension fund managers cut their exposure to bonds in favor of equities in 2013, a survey showed, underscoring a shift away from fixed-income securities as investors expect rising interest rates to curb returns.

Institutional pension fund managers across 13 countries reduced the proportion of assets held in bonds to 29 percent in 2013 from 34 percent a year earlier while boosting their equities holding to 52 percent from 47 percent, a global pension asset study by researcher Towers Watson & Co. (TW:US) showed.

Riskier assets gained favor in 2013 as the outlook for the U.S. economy improved, pushing up the MSCI World Index of global equities by 24 percent, while Merrill Lynch’s global bond index fell 0.3 percent. The U.S. Federal Reserve is reducing stimulus, known as quantitative easing, pushing up market interest rates. The benchmark U.S. 10-year Treasury yield climbed in 2013 for the first time since 2009.

“During 2013 equities enjoyed their best calendar year of risk-adjusted return since the financial crisis and as a result pension funds in most markets are in the best shape they have been for many years,” Martin Goss, senior investment consultant for Towers Watson in Australia, said in a statement today.

Global institutional pension fund assets across the 13 major markets climbed 9.5 percent to a record $31.98 trillion, Towers Watson said, beating a 6.9 percent gain in 2012 and average increase of 6.7 percent in the past 10 years, according to the study.

Fund managers in the U.S., the largest pension market, raised their equity holdings to 57 percent in 2013 from 52 percent in 2012 and dropped bond holdings to 23 percent from 27 percent, the study found. U.S. pension assets grew 12 percent in 2013 to $18.9 billion, according to the study.

To contact the reporter on this story: Narayanan Somasundaram in Sydney at

To contact the editor responsible for this story: Chitra Somayaji at

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