OECD Says Pension Funds World Wide Are Recovering
Posted: Tuesday, July 27, 2010
Pension funds, a big worry for workers and governments everywhere, are recovering from crisis, but also face new risks including government debt, and seem to be raising their use of hedging for safety. Private funds have made up nearly half of the hit they took in the market nightmare of 2008, the Organisation for Economic Cooperation and Development says on the basis of sample data for December 2009. This means that at the end of last year, private investment funds had assets totaling 16.8 trillion dollars (13.0 trillion euros). By way of comparison this is bigger than total U.S. gross domestic product last year, which was 14.25 trillion dollars according to World Bank data, substantially more than eurozone GDP of 12.455 trillion dollars. Total world output in 2009 was 58.133 trillion dollars. The market crash in 2008 cut OECD private pension fund values by 3.5 trillion dollars. By December, a stocks rally had retrieved about 1.5 trillion dollars of this but the boost has petered out. "Anecdotal evidence shows that pressure ... to raise returns is driving a move into alternative investments with pension funds increasingly using derivatives to hedge risks and as an alternative to direct investment in the underlying markets." This trend "by pension funds into hedge funds and other alternative instruments as well as a growing appetite for derivatives" was likely to continue, it said in remarks which may be seen as ironic just as many governments tighten the noose around such activities, much vilified during the financial crisis.
Source: AFP/Google News (July 16, 2010)
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From the NAELA eBulletin July 20, 2010 -- A weekly newsletter by Professor Kim Dayton, David McGuffey, CELA, and Rajiv Nagaich. The eBulletin is published by the National Academy of Elder Law Attorneys and is a benefit of NAELA membership.