ASIA, September 7, 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. The AUM of APAC funds in the top 20 increased by 10.6% during the year, meaning those funds represented 44% of assets managed overall by the top 20 funds, compared to 43% in 2018.
According to the research, Asia-Pacific funds experienced the largest annualised growth rate in the last five years at 7.0%, compared to the 5.5% average for the top 20 funds and 4.9% for the top 300 funds during the same period. In terms of total AUM and number of funds, Asia-Pacific remains the second largest region, accounting for 26.6% of all assets in the research, while North America continues to rank first at 43.8%.
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%). Based on weighted average allocations by region, Asia-Pacific funds have largely allocated assets to fixed income investments (51.7%), while North American and European funds have predominantly invested in equities (43.9% and 50.9%, respectively).
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, particularly concerning climate and social issues. Perhaps most notably of course, we are still witnessing 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.”
Jayne Bok, Head of Investments, Asia at Willis Towers Watson, added: “Asia-Pacific pension funds have experienced exceptional growth over the last five years compared to their North American and European counterparts. However, the road ahead is looking increasingly uncertain, with geopolitical tensions, climate crises and the ongoing COIVD-19 pandemic making financial markets increasingly volatile. To maintain this growth, and overcome the challenges ahead, funds must take a long, hard look at their portfolios and ensure they are not overexposed to one investment class or market.”
“Funds can easily create more diversity within their portfolios by increasing their allocations to new and emerging asset classes, such as Chinese equities, which have proven to be highly resilient during COVID-19, as well as ESG investments that can help them mitigate climate risks that are becoming greater by the day.”
Nine funds in the top 20 mentioned the importance of sustainable and responsible investment by implementing best practices in corporate governance, to ensure the long-term value of the funds’ investments, while nine funds emphasised the importance of recruiting a high performing and diverse workforce as a key component of the long-term strategy for success.
Among the top 300 funds, defined contribution (DC) assets grew by 9.2% during 2019, while defined benefit (DB) assets increased by 7.1%. DB funds account for 64.2% of the total AUM in the research, down modestly from 64.7% the previous year. The share of DB funds slightly decreased across all regions – with the exception of Asia-Pacific, where the same level was maintained. DB plans dominate in North America and Asia-Pacific where they represent 74% and 65% respectively.
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.
The Government Pension Investment Fund of Japan has maintained its position as the largest fund in the world, held since 2002, with US$1.6 trillion in AUM. This is over 40% larger than the second-biggest fund in the ranking, the Government Pension Fund of Norway at US$1.1 trillion. The National Pension fund in South Korea (3rd) and the Central Provident Fund (8th) in Singapore moved up by one place from their last year’s ranking position. And China’s National Social Security (7th) retains its previous year’s position in the ranking.
There were no changes in the composition of the top 20 funds in 2019.
| 2018 Rank |
2019 Rank |
Fund | Market | Total Assets |
|---|---|---|---|---|
| 1 | 1 | Government Pension Investment Fund | Japan | $1,555,550 |
| 2 | 2 | Government Pension Fund | Norway | $1,066,3801 |
| 4 | 3 | National Pension | South Korea | $637,279 |
| 3 | 4 | Federal Retirement Thrift | U.S. | $601,030 |
| 5 | 5 | ABP | Netherlands | $523,310 |
| 6 | 6 | California Public Employees | U.S. | $384,435 |
| 7 | 7 | National Social Security | China | $361,0871 |
| 9 | 8 | Central Provident Fund | Singapore | $315,857 |
| 8 | 9 | Canada Pension | Canada | $315,3442 |
| 10 | 10 | PFZW | Netherlands | $243,8392 |
| 11 | 11 | California State Teachers | U.S. | $243,311 |
| 13 | 12 | Employees Provident Fund | Malaysia | $226,101 |
| 15 | 13 | Local Government Officials | Japan | $224,006 |
| 12 | 14 | New York State Common | U.S. | $215,424 |
| 14 | 15 | New York City Retirement | U.S. | $208,458 |
| 16 | 16 | Florida State Board | U.S. | $173,769 |
| 18 | 17 | Employees’ Provident | India | $168,0951 |
| 19 | 18 | Ontario Teachers | Canada | $159,666 |
| 17 | 19 | Texas Teachers | U.S. | $157,632 |
| 20 | 20 | ATP | Denmark | $144,983 |
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 45 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, 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.
