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The report says that weak equity markets and low interest rates drove the poor performance. Many funds shifted their geographical allocation to reduce exposure to countries deemed to be risky, notably in Chile, Denmark, Netherlands and the Slovak Republic. The crisis also led many funds to reconsider their alternative investments, such as hedge funds and private equity, and strengthen their governance and risk controls.
Looking ahead, funds need to find solutions to shortfalls in funding through more transparent investment disclosure, better understanding and confidence on the part of pension fiduciaries, and more consistent performance measurement, says the OECD.
The best performing pension funds came from Denmark (12.1 per cent), the Netherlands (8.2 per cent), Australia (4.1 per cent) and Iceland (2.3 per cent).Funds in Spain, the United States, Italy and Japan had negative returns ranging from -2.2 per cent to -3.6 per cent. Seven countries, including Finland, Greece, Austria and Poland, saw returns worse than -4 per cent in real terms.
By December 2011, OECD pension fund assets amounted to 72.4 per cent of gross domestic product on average, up from 67.3 per cent in 2001. The Netherlands had the largest ratio, at 138 per cent of GDP, followed by Iceland (128.7 per cent), Australia (92.8 per cent) and the United Kingdom (88.2 per cent).