HONG KONG, November 27, 2023 – Sovereign Wealth Funds now make up a record share of assets among the largest 100 global asset owners, according to new research by the Thinking Ahead Institute.
Sovereign Wealth Funds (SWFs) make up 38.9% of total assets among the world’s largest 100 asset owners (AO100), up from 36.7% the previous year. In absolute terms, SWFs within the AO100 now represent US$9.1 trillion. This has risen as a proportion due to a slower correction in collective assets among turbulent markets – after SWFs saw the combined effects of relative investment performance and new inflows outperform over the last twelve months compared to other types of asset owner.
As a result, pension funds only just retain the majority share of AUM among the largest 100, with the combined assets of pension funds making up 52.8%, while outsourced CIOs and master trusts are responsible for the remaining 8.3% of total AUM in the AO100.
This marks a clear decline over the medium term. Five years ago, pension funds made up more than 60% of the AO100, while SWFs represented 32% or less than one third.
Taken as a whole, the world’s 100 largest asset owners are now responsible for US$ 23.4 trillion as of the end of 2022; experiencing a decline of nearly 9% compared to the previous year when this stood at US$25.7 trillion for the largest 100 asset owners at the time.
Other findings from the full study by the Thinking Ahead Institute, which provides key insights and trends on the top 100 asset owners in the world, include a growing concentration of assets at the very top of the rankings across all types of organisation, and differences in investment allocations.
The very largest 20 asset owners in the world now have a total of US$12.9 trillion alone and this largest 20 represent 55.2% of the total AUM in the top 100. This concentration at the top of the rankings is caused by a slower decline in asset values among the largest asset owners, in the preceding 12 months. In fact, just the top five asset owners accounted for 24.4% of total AUM in the study with US$5.7 trillion.
Although the value of assets has decreased in 2022, asset owners in Asia Pacific (APAC) account for a larger share of the assets in the top 20. Of the largest 20 asset owners, eight are from the APAC region, representing 47% of the top 20 AUM. The proportion of their portfolios is spilt across equities (49.1%), followed by fixed income (33.2%) and alternatives (17.7%).
The Government Pension Investment Fund of Japan remains the largest asset owner in the world, with an AUM of US$1.4 trillion alone. The top three also includes the two largest sovereign wealth funds. Norway’s Norges Bank Investment Management comes second with AUM of US$1.3 trillion while China Investment Corporation with US$1.1 trillion is third globally.
Overall, APAC accounts for 33.7% of the total AUM in the AO100 study, on par with North America at 33.9%, and with EMEA representing 32.4% of total AUM. Whilst pension funds dominate in North America (75%) and SWFs in EMEA (71%), APAC is more evenly distributed with pension funds (55%) ad SWFs (44%). APAC funds also have the highest share in equities (47.9%), followed by allocation to fixed income (35%) and alternatives (17.1%).
Jessica Gao, Director at the Thinking Ahead Institute, comments: “Asset owners from SWFs to pension funds have navigated a year when volatility and uncertainty in the global economy have been at their highest in a generation – with often divergent outcomes.
“The disruption caused by elevated inflation and increased interest rates has affected equity and bond markets on a global scale, putting extra pressure on asset owners to reassess and adjust their strategies. The shift from an era of low inflation and interest rates has given a rise to a new macroeconomic landscape that demands a fresh understanding and management approach. This is impacting different types of asset owner in different and unexpected ways.
“Despite this, we have seen some positive outcomes from such unprecedented uncertainty. New risk methodologies are emerging, from the old view of strategic asset allocation towards leading funds adopting a Total Portfolio Approach (TPA) – where goals are the central driving force and best ideas are incorporated through a competition for capital at the total portfolio level. That has also allowed some large asset owners to ride escalating market waves with better short and medium-term outcomes too. Meanwhile, we’ve also noticed a renewed emphasis on positive culture, when markets put asset owners and their teams under pressure.”
Jayne Bok, Head of Investments Asia, WTW, continues: “The APAC region has historically punched above its weight in the AO100 rankings due to a higher proportion of large government pension and SWFs coupled with growing economies and demographics, and this is evidenced by the rise of China asset owners in the rankings. However, relative growth in assets has been slower than North America in the most recent period. One of the contributing factors is a significantly lower allocation to alternatives in APAC (17.1%) versus North America (35.4%). That said, I’m encouraged to see a similar trend towards TPA thinking and innovation around asset allocation, so I expect this gap to narrow as APAC asset owners catch up with their global peers on the alternatives side.”
The report also reveals the largest asset owners have an emerging awareness and understanding of the significance of artificial intelligence (AI) for the investment and decision-making process. Out of the 20 largest global asset owners, 9 proactively reported a focus on this area of AI while 11 mentioned a growing investment in technology more broadly to support innovation.
Jessica Gao concludes: “Globally-significant asset owners are showing greater awareness and planning for globally-significant trends. This has ranged, just in the last twelve months, from equally-existential questions of systemic risk – from climate to geopolitics and technology. Such a breadth of threats and opportunities will require a delicate juggling act as investment organisations strive to balance their own internal investments.
| Rank | Fund | Market | Total Assets (US$) |
|---|---|---|---|
| 1. | Government Pension Investment Fund | Japan | $1,448,643 |
| 2. | Norges Bank Investment Management | Norway | $1,250,000 |
| 3. | China Investment Corporation | China | $1,149,000 |
| 4. | SAFE Investment Company | China | $1,034,000 |
| 5. | Abu Dhabi Investment Authority | United Arab Emirates | $831,000 |
| 6. | Kuwait Investment Authority | Kuwait | $769,000 |
| 7. | National Pension Service | South Korea | $706,496 |
| 8. | GIC Private Limited | Singapore | $690,000 |
| 9. | Federal Retirement Thrift[1] | U.S. | $689,858 |
| 10. | Public Investment Fund/Sanabil Investments | Saudi Arabia | $620,000 |
| 11. | APG | Netherlands | $490,382 |
| 12. | California Public Employees | U.S. | $432,235 |
| 13. | Qatar Investment Authority | Qatar | $425,000 |
| 14. | Canada Pension Plan[2] | Canada | $420,764 |
| 15. | Central Provident Fund | Singapore | $406,711 |
| 16. | National Social Security[3] | China | $347,214 |
| 17. | Mercer | U.S. | $337,733 |
| 18. | Temasek Holdings | Singapore | $298,000 |
| 19. | CDPQ | Canada | $297,000 |
| 20. | California State Teachers | U.S. | $290,384 |
Figures were the latest available as at 31 December 2022.
The Thinking Ahead Institute (TAI) is a not-for-profit research and innovation network motivated to influence the investment industry for the good of savers worldwide and to mobilise capital for a sustainable future. Since its establishment in 2015, almost 90 investment organisations have collaborated to bring this vision to light through designing fit-for-purpose investment strategies, working towards better organisational effectiveness and strengthening stakeholder legitimacy.
WTW’s Investments is an investment advisory and asset management firm focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 colleagues worldwide, more than 1,000 investment clients globally, assets under advisory of over US$4.7 trillion and US$187 billion of assets under management.
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