GLOBAL - Swedes hold more equities in their defined contribution pension funds than other nationality, according to research from Watson Wyatt.
In a review of defined contribution schemes from nine different regions, Watson Wyatt found that Swedes have just under 95% of their DC assets invested in equities. Sweden’s nearest rival was Hong Kong, which allocates 80% of its total DC assets to equities. Chileans held the lowest number, with just 20% of DC scheme assets held in equities.
Danes held the most bonds, with approximately 65% of their DC holdings in fixed income. Americans held the lowest amount, with barely 2% investing their DC money in fixed income.
The survey also found huge regional variations regarding the composition of DC plans. Whilst just under 60% of Swedish DC assets are allocated to foreign equities, American DC plans have a negligible amount invested in non-US stocks.
Fixed income also revealed huge regional variations, with Danes allocating 65% of their assets to fixed income, whilst Swedes hold less than 10% of their DC assets in that asset class.
Nine different pension markets were examined in the study: Australia, Canada, Chile, Denmark, Hong Kong, Sweden, Switzerland, the UK and US. The consultancy found that most schemes preferred to hold their own nations bonds. Hong Kong schemes were the notable exception - approximately 18% of total DC assets are allocated to fixed income, but of those holdings are almost exclusively foreign.
Additionally, Watson Wyatt anticipates that the growing take up of DC schemes will continue as accounting standards such as FRS17 and FAS 87 highlight the balance sheet volatility that goes hand in hand with DB arrangements.
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