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ARLINGTON, Va., Sept. 06, 2016 -- Total assets of the world’s largest 300 pension funds fell by over 3% in 2015 (compared to growth of over 3% in 2014) to a sum of $14.8 trillion, according to research conducted by Pensions & Investments (P&I), a leading U.S. investment newspaper, and Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company. Despite this first drop in assets since the beginning of the global financial crisis, cumulative asset growth since then is almost 19%.
The P&I/Willis Towers Watson global 300 research shows that by individual region, North America had the highest five-year compound growth rate of around 6%, compared to Europe (around 4%) and Asia Pacific (around 1%). The research also shows that the world’s top 300 pension funds now represent around 42% of global pension assets.* According to the research during 2015, only hybrid plan assets grew, by almost 14%, while all other fund types declined: defined benefit (DB) plans assets by almost 5%, defined contribution (DC) by over 2% and reserve funds** by 0.3%.
“The continuing tides of asset rises and falls combined with ever-increasing liabilities bears testament to how difficult it has become for funds to meet their respective missions,” said Steve Carlson, head of Investment, North America. “Large asset owners can have an advantage in this volatile investment world by improving organizational effectiveness to enhance decision making. Good investment governance is key in producing the competitive edge necessary to transform portfolios and succeed in the ever-evolving mission of trying to pay benefits securely, affordably and in full.”
According to the research on the world’s leading funds, the U.S. remains the country with the largest share of pension fund assets, accounting for around 38%, while Japan has the second-largest market share with around 12%. The Netherlands has the third-largest market share with over 6%, while Norway and the U.K. are fourth and fifth largest with around a 6% and 5% share, respectively.
The research shows that 27 new funds entered the ranking during the past five years, and on a net basis, the U.S. contributed the most new funds (10) followed by the U.K., South Korea, Australia, France, Peru, Vietnam and Italy. During the same period, Mexico had the largest net loss of funds from the ranking (four), followed by Germany, Japan and Switzerland (three). The U.S. has the largest number of funds in the research (131), followed by the U.K. (27), Canada (19), Australia (16), Japan (15) and the Netherlands (12).
*Estimation is based on the P&I/Willis Towers Watson global 300 ranking and the Willis Towers Watson Global Pension Asset Study.
**Reserve funds are set aside by a national government to guarantee pension payments and are characterized by no explicit liabilities and hence are neither DB nor DC.
“There has been a fair amount of movement in the ranking in the past five years, with winners likely being determined by having fully diversified portfolios that perform well in times of stress and a focus on total rather than relative returns,” said Carlson. “Another differentiator of leading funds is their ability to innovate or be an early adopter. One area where investors have embraced this is thinking innovatively about betas across all return drivers in their portfolios and balancing this with appropriate focus on capturing alpha. New thinking is being channeled into how to bring together internal and external intellectual capital in a cost-effective mix. This has had the welcome effect on the industry as a whole of sharpening the active management proposition and checking the rise in costs.”
Sovereign pension funds* continue to feature strongly in the ranking, with 27 of them accounting for 28% of assets and totaling around $4.2 trillion. The 115 public sector funds in the research had assets of almost $6 trillion in 2015 and account for 39% of the total. Private sector industry funds (58) and corporate funds (100) account for 14% and 19%, respectively, of assets in the research.
“The investment landscape is changing rapidly as more asset owners address their relatively weak investment governance position to become more effective in their investment practices,” said Carlson. “We're seeing stronger capabilities among the biggest asset owners, and the best investment practice is usually associated with getting a good balance between internal resources and external delegations. This strengthening of resources enables funds to be more keyed into their broader responsibilities, whether on the issues of environmental, social and governance factors, their ownership responsibilities and opportunities, and for a few funds, their pro-social impacts.”
*As established by national authorities for the meeting of pension liabilities. We acknowledge that there are many other state-sponsored funds established — we have attempted to restrict this to funds specifically sponsored by national authorities.
| Top 20 pension funds (USD millions) | ||||||||||||||
| Rank | Fund | Country | Total assets | DB | DC | |||||||||
| 1. | Government Pension Investment | Japan | $ | 1,163,203 | $ | 1,163,203 | ||||||||
| 2. | Government Pension Fund | Norway | $ | 865,943 | ||||||||||
| 3. | Federal Retirement Thrift | U.S. | $ | 443,328 | $ | 443,328 | ||||||||
| 4. | National Pension | South Korea | $ | 435,405 | $ | 435,405 | ||||||||
| 5. | ABP | Netherlands | $ | 384,271 | $ | 384,271 | ||||||||
| 6. | National Social Security | China | $ | 294,939 | ||||||||||
| 7. | California Public Employees | U.S. | $ | 285,774 | $ | 283,879 | $ | 1,895 | ||||||
| 8. | Central Provident Fund | Singapore | $ | 211,373 | $ | 211,373 | ||||||||
| 9. | Canada Pension | Canada | $ | 201,871 | 1 | $ | 201,871 | |||||||
| 10. | PFZW | Netherlands | $ | 186,471 | 1 | $ | 186,471 | |||||||
| 11. | California State Teachers | U.S. | $ | 181,875 | $ | 181,294 | $ | 581 | ||||||
| 12. | Local Government Officials | Japan | $ | 176,160 | 2 | $ | 176,160 | |||||||
| 13. | New York State Common | U.S. | $ | 173,541 | $ | 173,541 | ||||||||
| 14. | Employees Provident Fund | Malaysia | $ | 161,707 | $ | 161,707 | ||||||||
| 15. | New York City Retirement | U.S. | $ | 155,120 | $ | 155,120 | ||||||||
| 16. | Florida State Board | U.S. | $ | 147,819 | $ | 139,231 | $ | 8,588 | ||||||
| 17. | Texas Teachers | U.S. | $ | 125,327 | $ | 125,327 | ||||||||
| 18. | Ontario Teachers | Canada | $ | 123,985 | $ | 123,985 | ||||||||
| 19. | ATP | Denmark | $ | 106,640 | $ | 106,640 | ||||||||
| 20. | GEPF | South Africa | $ | 103,147 | 3 | $ | 103,147 | |||||||
| 1 | As of March 31, 2016 | |||||||||||||
| 2 | Estimate | |||||||||||||
| 3 | As of March 31, 2015 | |||||||||||||
| Sovereign pension funds (USD millions) | ||||||||||||
| Rank | Fund | Country | Total assets | DB | DC | |||||||
| 1. | Government Pension Investment | Japan | $ | 1,163,203 | $ | 1,163,203 | ||||||
| 2. | Government Pension Fund | Norway | $ | 865,943 | ||||||||
| 3. | National Pension | South Korea | $ | 435,405 | $ | 435,405 | ||||||
| 4. | National Social Security | China | $ | 294,939 | ||||||||
| 5. | Central Provident Fund | Singapore | $ | 211,373 | $ | 211,373 | ||||||
| 6. | Canada Pension | Canada | $ | 201,871 | 1 | $ | 201,871 | |||||
| 7. | Employees Provident Fund | Malaysia | $ | 161,707 | $ | 161,707 | ||||||
| 8. | GEPF | South Africa | $ | 103,147 | 2 | $ | 103,147 | |||||
| 9. | Employees' Provident | India | $ | 93,743 | 2 | $ | 93,743 | |||||
| 10. | Future Fund | Australia | $ | 86,314 | ||||||||
| 11. | National Wealth Fund | Russia | $ | 71,717 | 3 | |||||||
| 12. | Labor Pension Fund | Taiwan | $ | 67,244 | $ | 20,388 | $ | 46,856 | ||||
| 13. | Public Institute for Social Security | Kuwait | $ | 60,986 | 1, 4 | |||||||
| 14. | FRR | France | $ | 39,444 | ||||||||
| 15. | AP Fonden 3 | Sweden | $ | 37,609 | ||||||||
| 16. | AP Fonden 4 | Sweden | $ | 36,134 | ||||||||
| 17. | Fondo de Reserva Seguridad | Spain | $ | 35,294 | ||||||||
| 18. | AP Fonden 2 | Sweden | $ | 34,898 | ||||||||
| 19. | AP Fonden 1 | Sweden | $ | 33,524 | ||||||||
| 20. | AP Fonden 7 | Sweden | $ | 30,315 | ||||||||
| 21. | Zilverfond | Belgium | $ | 23,394 | ||||||||
| 22. | Ireland Strategic Investment | Ireland | $ | 23,253 | ||||||||
| 23. | State Pension | Finland | $ | 19,450 | $ | 19,450 | ||||||
| 24. | Social Insurance Funds | Vietnam | $ | 19,352 | ||||||||
| 25. | New Zealand Superannuation | New Zealand | $ | 19,148 | 5 | |||||||
| 26. | Fonds de Comp./Securite Sociale | Luxembourg | $ | 15,450 | ||||||||
| 27. | FEFSS | Portugal | $ | 15,321 | ||||||||
| 1. As of March 31, 2016 | 2. As of March 31, 2015 | 3. As of January 1, 2016 | 4. Estimate | 5. As of June 30, 2015 |
About Willis Towers Watson Investment
Willis Towers Watson’s Investment business is 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 associates worldwide, assets under advisory of over US$2.3 trillion and around US$75 billion of assets under management.
About Willis Towers Watson
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 39,000 employees in more than 120 countries. 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. Learn more at willistowerswatson.com.
Media contact Ed Emerman: +1 609 275 5162 [email protected]
