Global Pension Asset Allocations and Debt Markets

Ding Ding, Xiang Fang, Bryan Hardy and Karen K. Lewis

No 21722, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The pension sector is an important investor group in global financial markets and a key holder of government and corporate debt. This article examines the evolution of pension fund asset allocations around the globe and documents two important structural changes. First, pension investors have shifted portfolio share allocations away from fixed income securities. This trend is robust across Defined Contribution (DC) and Defined Benefit (DB) programs as well as country groups. Second, pensions have instead shifted allocations into riskier investments within mutual funds as well as alternative investments. We hypothesize that a global decline in interest rates is one potential driver of this change. Using a global sample, we show that declining local currency government bond yields are associated with lower bond pension portfolio shares and higher holdings shares of mutual funds and foreign assets. We discuss the potential implications of these trends for borrowing costs. The declining holding share of pensions as a long-term investor group implies financing costs are less sensitive to new debt issues, but more sensitive to global uncertainty.

Keywords: Pension funds; Asset allocation; Fixed income securities; Global financial markets; Government debt; Alternative investments (search for similar items in EconPapers)
JEL-codes: F34 G11 G15 G23 (search for similar items in EconPapers)
Date: 2026-07
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