Biggest pension funds hit $15trn in assets

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The world’s 300 biggest pension funds grew their assets 6% in 2013 to a total estimated at $15trn, according to the P&I/Towers Watson global 300 research, published in the US.

These 300 funds represent some 47% of global pension assets, the research suggests.

Growth rates of funds were faster in Latin America and Africa, where they grew at a five year compound rate of 16%, against 12% in Europe, 6% in North America, and 5% in Asia-Pacific.

The research identifies the continued decline in defined benefit (DB) assets, which now account for some 67% of total assets against 75% five years ago.

Growth in DB assets was about 3%, against reserve fund growth of 15%, defined contribution plan growth of over 9%, and hybrids up 8%.

Unusual monetary policy helped pension funds over the five year period to 2013, with quantitative easing facilitating returns from equities.

Chris Ford, global head of Investment at Towers Watson, said: “This clearly helped many funds given their high allocation to equities.”

He added: “Despite ongoing high performance from equities many funds, particularly more mature funds, continue to diversify into other asset classes as they de-risk their portfolios. There is also broad acknowledgement that QE and low interest rates will not last forever and that recent exceptional equity market growth is unlikely to repeat in 2015.”

By country, the US is still the biggest source of large pension funds, with assets accounting for 36% of the total of the global 300. Japan is second with 13%, chiefly because of its Government Pension Investment Fund, with assets of $1.2trn.

The Netherlands accounts for 7% of assets, while Norway and Canada have 6% each.

The US also leads by number of funds in the global 300. Despite a net loss of 12 funds from the ranking, it still accounts for 126 funds in the research. The UK is the next highest with 26 funds, followed by Canada (19), Australia (16), Japan (14) and the Netherlands (13).

Sovereign wealth funds remain key players in the global pension fund industry. The 27 such funds in the global 300 have assets of some $4.2trn. There are also 113 public sector funds identified by the research, with assets of $5.8trn.

Ford said: “Investors have been justifiably preoccupied with managing risk for a number of years but now are increasingly searching for elusive yield. This competition will become fiercer in the face of expected anaemic growth and benign inflationary conditions globally and which will increasingly polarise winners and losers. Most funds are unlikely to get adequate returns from the market in the coming year and will need to work hard in ‘added-value spaces’ to find the couple of extra per cent per annum they need. Investors will need to be well organised to deliver this and it will likely involve a substantial shift in focus away from security selection in equities and towards capturing returns from alternative markets and strategies.”



Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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