GLOBAL, 07 September, 2020 – Assets under management (AUM) at the world’s 300 largest pension funds increased in value by 8.0% to a total of US$19.5 trillion in 2019, in contrast to the 0.4% decline the year before, according to the latest top 300 pension funds research from the Thinking Ahead Institute.
The research, conducted in conjunction with Pensions & Investments, a leading U.S. investment newspaper, shows that the value of the top 20 pension funds’ AUM also rose by 8.1% in the same period, equating to 40.7% of the total AUM in the rankings, unchanged from the previous year.
According to the research, the compound annual growth rate of the top 20 funds during the past five years was 5.5%, compared to 4.9% for the top 300 funds during the same period.
Roger Urwin, co-founder of the Thinking Ahead Institute, said: “Overall, the world’s largest pension funds staged a strong rebound in growth in 2019, following a tough market environment the year before. However, this positive result does not detract from the multiple pressures currently facing pension funds, from concerns around solvency levels, to rising expectations with regards to ESG considerations, and in particular climate and social issues. Perhaps most notably of course, we are still witnessing the ramifications from the covid-19 crisis and, as we anticipate further economic uncertainty in the months ahead, these challenges make pension fund boards’ agendas more complex and stressed than at any previous time.
“Large funds are typically using best-practice governance to manage these complex agendas and retain a strategic focus. One of their top priorities now is harnessing the power of data and technology, an area where the pensions industry has generally lagged other areas of business and finance. Notwithstanding the significant costs of investing in new technologies, and the challenges of managing data, these two areas are critical tools in improving the people, processes, and information that will determine which funds prosper in the years ahead.”
The share of reserve funds (those set aside by a national government against future liabilities) increased by 9.9%, whilst hybrid fund assets (those with both DB and DC components) increased by 11.7% during the year.
Sovereign and public sector pension funds account for 68.3% of the total AUM in the research, with 144 funds of this type in the top 300. Sovereign pension funds account for US$5.6 trillion of the assets, while sovereign wealth funds account for US$8.2 trillion.
North America remains the largest region in terms of AUM and number of funds, accounting for 43.8% of all assets in the research, followed by Asia-Pacific (26.6%) and Europe (25.8%). Asia-Pacific has the largest annualised growth rate in the last five years at 7.0%. North America and Europe had annualised growth rates of 5.1% and 2.8% respectively, while Latin American and African funds’ AUM increased 2.6% during the same period.
A total of 30 new funds entered the top 300 in the last five years, with the US contributing the greatest net number of new funds (14) having had ten funds leave the ranking and 24 joined. In contrast, the UK had the highest net loss of funds (4) during the same period. The US continues to have the largest number of funds in the top 300 ranking (142), followed by the UK (23), Canada (18), Australia (16) and Japan (13).
On a weighted average for the top 20 funds, assets are predominantly invested in equities (45.4%) followed by fixed income (36.8%) and alternatives and cash (17.8%). Regarding weighted average allocations by region, North American and European funds have predominantly invested in equities (43.9% and 50.9%, respectively), while Asia-Pacific funds have largely allocated assets to fixed income investments (51.7%).
There were no changes in the composition of the top 20 funds in 2019.
Top 20 pension funds (US $ millions)*
| Rank | Fund | Market | Total Assets |
|---|---|---|---|
| 1. | Government Pension Investment | Japan | $1,555,550 |
| 2. | Government Pension Fund | Norway | $1,066,380¹ |
| 3. | National Pension | South Korea | $637,279 |
| 4. | Federal Retirement Thrift | U.S. | $601,030 |
| 5. | ABP | Netherlands | $523,310 |
| 6. | California Public Employees | U.S. | $384,435 |
| 7. | National Social Security | China | $361,087¹ |
| 8. | Central Provident Fund | Singapore | $315,857 |
| 9. | Canada Pension | Canada | $315,344² |
| 10. | PFZW | Netherlands | $243,839² |
| 11. | California State Teachers | U.S. | $243,311 |
| 12. | Employees Provident Fund | Malaysia | $226,101 |
| 13. | Local Government Officials | Japan | $224,006 |
| 14. | New York State Common | U.S. | $215,424 |
| 15. | New York City Retirement | U.S. | $208,458 |
| 16. | Florida State Board | U.S. | $173,769 |
| 17. | Employees’ Provident | India | $168,095¹ |
| 18. | Ontario Teachers | Canada | $159,666 |
| 19. | Texas Teachers | U.S. | $157,632 |
| 20. | ATP | Denmark | $144,983 |
* US funds’ data is as of September 30, 2019.
* Non US funds’ data is as of December 31, 2019, except where shown:
¹ Estimate
² As of March 31, 2020
About the Thinking Ahead Institute
The Thinking Ahead Institute was established in January 2015 and is a global not-for-profit investment research and innovation member group made up of engaged institutional asset owners and service providers committed to changing and improving the investment industry for the benefit of the end saver. It has over 40 members around the world and is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group, which was set up in 2002.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.