3.1 Equities in pension funds
We will now explore how pension fund asset allocations differ across countries.
Activity 4 Pension fund asset allocation
Which three countries have the highest proportion of equities in their pension funds?
Australia, US and Finland.
Do you think this alters when looking at public pension plans?
Yes, the US is near the bottom in terms of equities and Australia only average for public pension plans.
Now which three countries have the smallest amount of bonds and equities as a proportion of the total?
Germany, Japan and Korea all have less than 50% of their portfolios in bonds and equities. Korea has a lot of cash, the other two countries have a significant proportion in ‘other assets’.
This leads us to the third reason why you might think equities are overweight in the model portfolio allocations. We discuss this in the following sub-section, Choosing asset classes.