Global top 20 pension fund assets rebound strongly: research

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Global top 20 pension fund assets rebound strongly: research

Assets under management (AuM) at the world's 300 largest pension funds increased in value by 8.0% to a total of $19.5trn 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.

Overall, the world’s largest pension funds staged a strong rebound in growth in 2019, following a tough market environment the year before."

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."

Unwin added: "Perhaps most notably, 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."

"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," he said.

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. To a smaller degree, DB plans also dominate in Europe (53%), whereas DC plans dominate elsewhere, particularly in Latin American countries, accounting for 71% of assets.

The share of reserve funds (those set aside by a national government against future liabilities) increased by 9.9%, while 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 $5.6trn of the assets, while sovereign wealth funds account for $8.2trn.

Regional variation
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 join. 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 Fund

Japan

$1,555,550

2

Government Pension Fund 

Norway 

$1,066,380 ¹

3

National Pension Fund

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 Fund

China

$361,087 ¹

8

Central Provident Fund

Singapore

$315,857

9

 Canada Pension

Canada 

$315,344 ²

10

PFZW 

Netherlands 

$243,839 ²

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

$168,095 ¹

18

Ontario Teachers

Canada

$159,666

19

Texas Teachers

U.S.

$157,632

20

ATP

Denmark

$144,983

* US funds' data is as of 30 September 2019.

* Non US funds' data is as of 31 December 2019, except where shown:

¹  Estimate 

²  As of 31 March 2020

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.