The main results of the new edition of this report are as follows:
The assets under management in private individually funded pension plans amounted to more than US$ 38 billion in the OECD countries at the end of 2016, the highest level achieved so far. The US holds 66% of such assets. These plans continued to expand in countries such as Australia, Canada, Denmark and the Netherlands, where assets under management exceeded the size of GDP.
Pension providers obtained positive real returns for the pension fund investments, net of capital expenditure, at the end of 2016 in 28 of the 31 OECD countries analyzed, and in 25 of the 32 non-OECD countries included in the analysis. These rates of return amounted to more than 2% on average, both within and without the OECD area. Annual returns were also positive in most countries during the last decade; the highest returns in the decade were observed in the Dominican Republic (6.3%), Colombia (5.8%) and Slovenia (5.2%).
Most countries invested pension fund assets directly in cash and bonds or shares in 2016. However, pension providers chose to invest these assets indirectly through collective investment schemes in some countries, such as Belgium, Estonia, Luxembourg, the Netherlands and Switzerland, in the OECD area; and in Kosovo and Lithuania, in jurisdictions outside of the OECD. Other asset classes, such as real estate and buildings, also represent an important part of the portfolio in some African countries (Kenya, Tanzania, and Zambia) or private equity funds in Colombia and Zambia.
Pension providers in all countries tend to favor domestic markets, and their foreign investments are directed towards certain regions or neighboring countries (with the same currency), which suggests a local and regional bias. These biases can be explained by the additional risks involved in foreign investment (foreign currency or political risks), the costs of covering these risks and having the knowledge and experience required in international markets, and/or by regulatory barriers that may inhibit foreign investment. While some non-OECD countries still prevent pension providers from investing abroad, there is a general trend towards easing restrictions, increasing the investment limits and extending the list of countries in which pension providers can invest.
