MELBOURNE, September 06, 2021 – Assets under management (AUM) of the world’s top 300 pension funds increased by 11.5% to a total of US$21.7 trillion in 2020, according to the annual research conducted by the Thinking Ahead Institute, in conjunction with Pensions & Investments, a leading U.S. investment newspaper. The research highlights high-level trends in the pension funds industry and provides information on how the characteristics of these funds have changed.
Marisa Hall, co-head of the Thinking Ahead Institute, reflects on key insights from the research: “Overall, the world’s largest pension funds grew strongly in 2020, yet the pandemic has also been a stark reminder of how the world is more interconnected and uncertain today than ever before. Pension fund boards are increasingly focused on managing many of the headwinds that have arisen from a 'new normal' of lower-for-longer interest rates, which has prompted concerns around solvency and led some schemes to increasingly stretch their risk budgets in order to meet return targets. Additionally, managing rising ESG expectations have created their own set of challenges and opportunities.
As a result, pension fund boards’ agendas have become more complex and demanding than at any previous time. While some larger funds use best-practice governance to retain a strategic focus in the face of this complexity and explore more dynamic investment models such as total portfolio thinking, other schemes are using this as an opportunity to review their governance models to ensure they remain sufficiently robust.
The shift in focus to meet the investment challenges of tomorrow, such as achieving net-zero targets and ensuring real-world impacts, is prompting an increasing number of pension fund boards to adopt a more holistic and agile approach as they revamp their people, investment and business models. Boards which are successfully managing this transition have employed the power of technology, governance and culture ingeniously. Other pension fund boards are taking notice.”
Over the last five years, the Asia Pacific region experienced the largest annualised growth rate at 9.9%. Europe and North America had annualised growth rates of 7.8% and 7% respectively, while Latin American and African funds’ AUM increased 5.7% during the same period. In 2020, North America remains the largest region in terms of AUM and number of funds, accounting for 41.7% of all assets in the study, followed by Asia Pacific (27.5%) and Europe (27.5%).
Overall, US continues to have the largest number of funds in the top 300 ranking (138), followed by the UK (23), Canada (18), Australia (16) and Japan (14). A total of 34 new funds entered the top 300 in the last five years, with the US contributing the greatest net number of new funds (7), having had 15 funds leave the ranking and 22 join.
The number of Australian funds remains the same but Telstra Super joined the list, while VicSuper dropped from the ranking on a standalone basis as a result of its merger into Aware Super (previously known as First State Super) during the year. This was a significant contributor to Aware Super’s 49% growth in AUM and moving 22 places up the rankings.
Average growth across the rest of the Australian funds was a strong 15%, reflecting robust investment returns and in, a number of cases, further merger activity. Australian funds moved up the global ranking eight places on average as a result.
Martin Goss, Senior Director in Australia, noted: “The superannuation fund landscape is rapidly evolving, with regulatory changes accelerating merger activity across small, medium and large funds. As this activity continues, we could see two or three Australian funds break into the Top 20 funds in the ranking over the next five years. And consistent with this growth, we are seeing the largest funds adapt their investment and operating models to manage and take advantage of their increasing scale, with meaningful internalisation of investment management occurring at a number of funds as well as an increasingly global focus. The significance of these changes means the governance burden on fund boards is rapidly evolving, with new roles and responsibilities, and a different approach to oversight required.”
Among the top 300 funds, DB fund assets continue to dominate at 63.4% of the total AUM. However, the share of DB fund assets has been declining modestly over the years, as DC funds, reserve funds and hybrid fund assets are slowly gaining traction.
DB schemes dominate in North America and Asia Pacific where they represent 73.7% and 64.7% respectively. To a smaller degree, DB schemes also account for a majority of assets in Europe (52%), whereas DC plans dominate in other regions accounting for 72.5% of assets, particularly in Latin American countries.
According to the research, sovereign and public sector pension funds account for 68% of the total AUM in the research, with 141 funds of this type in the top 300. Corporate pension funds come in second, making up 17% of total AUM (with 101 funds); and finally, private independent funds which account for 15% of total AUM with 58 funds.
The research also shows that the top 20 pension funds’ AUM, which constitute 41.8% of the total, grew by a 14.6% in 2020; the second highest annual growth rate since 2004. This translates in a compound annual growth rate during the last five years of 8.9% for the top 20 and 7.9% for the top 300.
The top 20 fund assets are predominantly invested in equities (46.6%) followed by fixed income (36.3%) and alternatives and cash (17.1%) – on a weighted average basis. These funds have, in aggregate, slowly increased their allocation to alternatives during the past few years in order to meet return-target goals.
There was one new entrant in the top 20 funds in 2020. The Russian National Wealth Fund moved from 25 to 17 in the ranking, replacing the Texas Teachers pension fund, from the U.S., which dropped to 21 in the ranking.
| Rank | Fund | Market | Total Assets |
|---|---|---|---|
| 1 | Government Pension Investment | Japan | $1,719,987 |
| 2 | Government Pension Fund | Norway | $1,305,920 |
| 3 | National Pension | South Korea | $765,446 |
| 4 | Federal Retirement Thrift | U.S. | $651,124 |
| 5 | ABP | Netherlands | $607,367 |
| 6 | National Social Security | China | $448,4271 |
| 7 | California Public Employees | U.S. | $426,247 |
| 8 | Canada Pension | Canada | $390,5032 |
| 9 | Central Provident Fund | Singapore | $349,787 |
| 10 | PFZW | Netherlands | $306,8932 |
| 11 | California State Teachers | U.S. | $259,246 |
| 12 | Employees Provident Fund | Malaysia | $248,203 |
| 13 | Local Government Officials | Japan | $248,094 |
| 14 | New York State Common | U.S. | $226,400 |
| 15 | New York City Retirement | U.S. | $225,450 |
| 16 | Employees' Provident | India | $193,8011 |
| 17 | National Wealth Fund | Russia | $183,0023 |
| 18 | Florida State Board | U.S. | $180,221 |
| 19 | ATP | Denmark | $176,606 |
| 20 | Ontario Teachers | Canada | $173,741 |
| 2020 Rank | 2019 Rank | Fund | Total Assets | Increase in AUM % |
|---|---|---|---|---|
| 22 | 23 | AustralianSuper | $156,265 | 21 |
| 25 | 29 | Future Fund | $131,475 | 11 |
| 39 | 61 | Aware Super* | $106,947 | 49 |
| 63 | 67 | QSuper | $79,248 | 26 |
| 70 | 74 | UniSuper | $70,162 | 16 |
| 81 | 94 | Sunsuper | $61,475 | 18 |
| 110 | 108 | REST | $46,056 | 10 |
| 112 | 117 | Cbus | $45,472 | 14 |
| 116 | 118 | HESTA | $44,641 | 12 |
| 132 | 140 | HOSTPLUS | $41,163 | 14 |
| 135 | 143 | CSC | $40,117 | 13 |
| 151 | 163 | State Super | $35,943 | 15 |
| 209 | 221 | ESSSuper | $25,806 | 15 |
| 212 | 226 | Super SA | $25,352 | 16 |
| 214 | 227 | GESB | $24,605 | 13 |
| 293 | - | Telstra Super | $17,696 | n/a |
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 50 members around the world and is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group, which was set up in 2002.
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, optimise 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.
1 Estimate
2 As of 31 March 2021
3 As of 1 January 2021
4 Figures as at 31 December2020
* First State Super changed its name to Aware Super in September 2020.
