ARLINGTON, VA, September 8, 2020 — Assets under management (AuM) at the world’s 300 largest pension funds increased in value by 8.0% to a total of $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 Willis Towers Watson’s Thinking Ahead Institute.
The research 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 with 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,” said Roger Urwin, co-founder of the Thinking Ahead Institute. “However, this positive result does not detract from the multiple pressures currently facing pension funds, from concerns around solvency levels to rising expectations with regard to ESG [environmental, social and governance] 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.”
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, except for Asia Pacific, where the same level was maintained. DB plans are more prevalent in North America and Asia Pacific where they represent 74% and 65% respectively. To a smaller degree, DB plans are also more prevalent in Europe (53%), whereas DC plans are more common 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 $5.6 trillion of the assets, while sovereign wealth funds account for $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 annualized growth rate in the past five years at 7.0%. North America and Europe had annualized 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 past five years, with the U.S. contributing the greatest net number of new funds (14), having had 10 funds leave the ranking and 24 join. In contrast, the U.K. had the highest net loss of funds (four) during the same period. The U.S. continues to have the largest number of funds in the top 300 ranking (142), followed by the U.K. (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.
| Rank | Fund | Market | Total Assets |
|---|---|---|---|
| 1 | Government Pension Investment Fund | Japan | $1,555,550 |
| 2 | Government Pension Fund | Norway | $1,066,3801 |
| 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 | $361,0871 |
| 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 |
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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.
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