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Asset allocation in investment
Asset allocation in investment

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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?

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Answer

Australia, US and Finland.

Do you think this alters when looking at public pension plans?

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Answer

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?

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Answer

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.