October 1996

Asset Management and Performance of the U.S. Pension System

The total of all pension assets as of first quarter 1996 is estimated to be $5.5 trillion. Individual retirement account and Keogh assets add an estimated $1.2 trillion for a total in structured retirement plans of $6.7 trillion.

Pension plans, both private and public, are major players in the U.S. economy. In 1995, 24.7 percent of all U.S. equities were held by pension plans, up from 16.6 percent in 1975 but down from 28.0 percent in 1985. In 1995, pension plans held 11.8 percent of all taxable bond assets, compared with 15.0 percent in 1975 and 14.2 percent in 1985.

Private trusteed pension fund assets increased 2.0 percent in the first quarter of 1996 to $2,755 billion from $2,700 billion at year-end 1995. Private trusteed pension fund assets increased by 18.0 percent during 1995.

In the first quarter of 1996, private trusteed pension investments experienced a net increase in earnings of $65 billion: $28 billion in dividends and interest and $37 billion in capital gains. Private trusteed funds total net flows, after net contributions, amounted to $56 billion in the first quarter of 1996.

Private trusteed pension assets held in equity increased 3.7 percent in the first quarter of 1996, assets held in bonds decreased 1.9 percent, assets invested in cash items decreased 1.6 percent, and assets in other investments increased 4.8 percent.

Between year-end 1989 and year-end 1995, assets held in equity grew at an average annual rate of 11.0 percent, assets in bonds grew at an average annual rate of 7.9 percent, and assets in cash items grew at an average annual rate of 0.4 percent. Assets in investments other than equity, bonds, and cash items grew at an average annual rate of 6.2 percent.

In the first quarter of 1996, single employer defined contribution plans held 47.1 percent of all private trusteed assets, or $1,299 billion. Single employer defined benefit plans held 52.9 percent of private trusteed pension assets, or $1,457 billion.

State and local government pension fund assets increased 21.0 percent in 1995, from $1,146 billion at year-end 1994 to $1,387 billion at year-end 1995. From 1990 to 1995, state and local government funds assets grew at an average annual rate of 11.1 percent.

Equities accounted for the largest percentage of assets in state and local government funds: 51 percent in 1995. Bonds accounted for 32 percent of all state and local government fund assets; cash items, 4 percent; and other assets, 13 percent.

Private insured funds held $860 billion in assets as of year-end 1995. Sixty-two percent of these assets were held in insurance company general accounts.

For more information on pension asset performance and management, contact Ken McDonnell, (202) 775-6342 or Paul Fronstin, (202) 775-6352.

Source: EBRI Quarterly Pension Investment Report, First Quarter 1996 (September 1996).
10/96