Retirement assets in the 13 major global markets increased 9.5% to a record $32 trillion as of Dec. 31, according to Towers Watson’s annual Global Pension Assets Study.

U.S. institutional assets also reached an all-time high of $18.9 trillion, up 12% from 2012.

U.S. assets make up about 59% of total global assets, up from 56%. Japan and the U.K. have the next greatest share of assets at 10% each. The 10-year average annualized growth rate of global assets for the 13 countries is just under 8% in local currency.

Pension assets had a significant increase as a ratio to global GDP, climbing up to 83% from 76% in 2012 and 57% in 2008. Over the last 10 years, the U.K.’s pension assets grew the most as a portion of GDP, to 131% from 67%. The U.S. was up 27 percentage points in that time period to 113%. Japan, Brazil and France have all seen modest drops as a proportion of GDP.

“The global economic recovery continued to gain momentum throughout 2013, thanks to the absence of major negative events and a stream of positive economic news,” said Chris DeMeo, head of investment for the Americas at Towers Watson, in a news release. “After such a long period of financial retrenchment and uncertainty, this is extremely encouraging. Generally, U.S. pension funds are now implementing investment strategies that are more flexible and adaptable, and contain a broader view of risk to make greater allowance for the sort of extreme economic and market volatility they have experienced during the past five years.”

Since 1995, overall allocations to equity and fixed income dropped, while alternative allocations increased to 18% from 5% for the seven largest markets — U.S., U.K., Japan, Netherlands, Canada, Australia and Switzerland, which made up 96% of the assets in the study. Fixed income is down in aggregate to 28% from 40%, while equity has dipped to 52% from 55%.

The U.S. and Australia have the highest allocations to equity at 57% and 54%, respectively. Japan still has the highest bond allocation at 51%, but it is down significantly from 71% in 2003. In that same time period, Japan has increased its equity allocation to 40% from 22%.

Defined contribution assets for the seven largest markets now make up 47% of global retirement assets, up from 45% in 2012 and 38% in 2003. The U.S. and Australia were the only countries that had more DC assets than DB. Japan, Canada and the Netherlands all have at least 95% of assets in DB plans. For the past 10 years, the compound annual growth rate of DC assets in the largest markets was 9% vs. 5% for DB assets.

All 13 markets had a positive 10-year compound annual growth rate in local currency terms, led by South Africa at 14%. Japan and France had the lowest rates at 1% each.

Sixty-six percent of assets in the seven largest markets were held by private-sector plans, led by the U.K. and Australia, at 88% and 84%, respectively. Japan and Canada are the only countries with more public assets than private.

Source: Pensions & Investments