Total assets of the world’s largest 300 pension funds grew by
over 6% in 2013 (compared to around 10% in 2012) to reach a new
high of almost $15 trillion (up from $14 trillion in 2012),
according to Pensions & Investments and Towers Watson (NYSE,
NASDAQ: TW) research. The P&I/Towers Watson global 300
research, conducted in conjunction with Pensions & Investments,
a leading U.S. investment newspaper, shows that by individual
region, Latin American and African funds had the highest five-year
combined compound growth rate of over 16% (albeit from a low base),
compared to Europe (12%), North America (approximately 6%) and Asia
Pacific (approximately 5%). The research also shows that the
world’s top 300 pension funds now represent roughly 47% of global
pension assets.1
According to the research, defined benefit (DB) funds account
for 67% of total assets, down from 75% five years ago. During 2013,
DB assets grew by approximately 3%, compared to reserve funds2
(15%), defined contribution (DC) plans (over 9%) and hybrids (over
8%).
“Quantitative easing (QE) and easy monetary conditions have
provided an unexpected tailwind for equity markets for the last
five years or so, which continued strongly in 2013,” said Chris
Ford, global head of Investment at Towers Watson. “This clearly
helped many funds given their high allocation to equities. 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 recent exceptional equity market growth is unlikely to
repeat in 2015.”
According to the research, the U.S. remains the country with the
largest share of pension fund assets, accounting for 36%. Japan has
the second-largest market share of roughly 13%, largely because of
the Government Pension Investment Fund. That fund, which is still
at the top of the ranking (a position it has held for the past 10
years), has assets of approximately $1.2 trillion. The Netherlands
has the third-largest market share, with 7%, while Norway and
Canada are fourth and fifth largest, respectively, with over 6%
share each.
1Estimation based on the P&I/Towers Watson global 300
ranking and Towers Watson Global Pension Asset Study.2Reserve 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.
*Real-asset strategies include a wide range of investment
opportunities (e.g., in agriculture, farmland, timberland, water
[including water rights] and natural resources). The distinctive
characteristic of real assets is tangible underlying assets, and
their connection to the food and resource scarcity theme.
The research shows that 38 new funds entered the ranking during
the past five years, and on a net basis, the countries that
contributed the most new funds were Australia (three funds),
followed by Canada, Colombia, Poland, Russia and South Korea (two
funds each). During the same period, the U.S. had a net loss of 12
funds from the ranking, yet it still accounts for 126 funds in the
research. The U.K. is the next highest with 26 funds, followed by
Canada (19), Australia (16), Japan (14) and the Netherlands
(13).
“The continuing growth of most pension markets is genuinely
encouraging, despite the many remaining structural issues. During
2013, we dared to believe that a number of positive developments
presaged the end of the global financial crisis, and as it turned
out, the global economic recovery has continued to gain momentum
into 2014. It is noteworthy that the 13 major pension markets are
now more than double the size they were 10 years ago, and pension
assets now amount to around 78% of global GDP, substantially higher
than the 61% recorded in 2008,” said Ford.
Sovereign funds1 continue to feature strongly in the ranking,
with 27 of them accounting for 28% of assets and totaling around
$4.2 trillion. The 113 public sector funds in the research had
assets of $5.8 trillion in 2013 and account for 39% of the total.
Private sector industry funds (61) and corporate funds (99) account
for 14% and 19%, respectively, of assets in the research.
“Investors have been justifiably preoccupied with managing risk
for a number of years, but now are increasingly searching for
elusive yield. This competition will become fiercer in the face of
expected anemic growth and benign global inflationary conditions,
and the situation will increasingly polarize winners and losers.
Most funds are unlikely to get adequate returns from the market in
the coming year and will need to work hard in ‘added-value spaces’
to find the couple of extra percent annually they need. Investors
will need to be well organized to deliver this, and it will likely
involve a substantial shift in focus away from security selection
in equities and toward capturing returns from alternative markets
and strategies,” said Ford.
1As established by national authorities for the meeting of
pension liabilities — we acknowledge there are many other
state-sponsored funds established, and we have attempted to
restrict this research to funds specifically sponsored by national
authorities.
Top 20 pension funds
(US$ millions)
Rank Fund Country
Region 2013 AUM 1. Government Pension
Investment Japan Asia Pacific $1,221,501 2. Government Pension Fund
Norway Europe $858,469 3. ABP Netherlands Europe $415,657 4.
National Pension South Korea Asia Pacific $405,521 5. Federal
Retirement Thrift U.S. North America $375,088 6. California Public
Employees U.S. North America $273,066 7. Canada Pension Canada
North America $206,173 1 8. National Social Security China Asia
Pacific $205,168 9. Central Provident Fund Singapore Asia Pacific
$200,376 10. PFZW Netherlands Europe $196,933 1 11. Employees
Provident Fund Malaysia Asia Pacific $182,216 12. Local Government
Officials Japan Asia Pacific $179,820 1 13. California State
Teachers U.S. North America $172,424 14. New York State Common U.S.
North America $164,008 15. Florida State Board U.S. North America
$146,266 16. New York City Retirement U.S. North America $143,925
17. Ontario Teachers Canada North America $132,445 18. Texas
Teachers U.S. North America $119,706 19. GEPF South Africa Other
$117,681 2 20. Pension Fund Association Japan Asia Pacific $117,636
1 As
of March 31, 2014 2 As of March 31, 2013
Top Sovereign pension funds
(US$ millions)
Rank Fund Country
Region 2013 AUM 1. Government Pension
Investment Japan Asia Pacific $1,221,501 2. Government Pension Fund
Norway Europe $858,469 3. National Pension South Korea Asia Pacific
$405,521 4. Canada Pension Canada North America $206,173
1
5. National Social Security China Asia Pacific $205,168 6. Central
Provident Fund Singapore Asia Pacific $200,376 7. Employees
Provident Fund Malaysia Asia Pacific $182,216 8. GEPF South Africa
Other $117,681
2
9. National Wealth Fund Russia Europe $88,179 3 10. Future Fund
Australia Asia Pacific $86,196 11. Fondo de Reserva Seguridad Spain
Europe $74,106 12. Employees' Provident India Asia Pacific $70,573
2 13. Labor Pension Fund Taiwan Asia Pacific $59,756 14. Public
Institute for Social Security Kuwait Other $56,871 1, 4 15. FRR
France Europe $50,054 16. AP Fonden 3 Sweden Europe $41,441 17. AP
Fonden 2 Sweden Europe $40,434 18. AP Fonden 4 Sweden Europe
$39,785 19. AP Fonden 1 Sweden Europe $38,692 20. National Pensions
Reserve Ireland Europe $27,854 1 21. Zilverfond Belgium Europe
$27,527 22. AP Fonden 7 Sweden Europe $26,670 23. State Pension
Finland Europe $22,524 24. FEFSS Portugal Europe $16,132 25. Fonds
de Comp./Securite Sociale Luxembourg Europe $16,086 26. New Zealand
Superannuation New Zealand Asia Pacific $14,205 5 27. Social
Insurance Funds Vietnam Asia Pacific $13,761
1 As of March 31, 2014 2
As of March 31, 2013 3 As of January 1, 2014 4 Estimate 5 As of
June 30, 2013
Towers Watson Investment
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 800
associates worldwide, assets under advisory of over $2 trillion and
over $65 billion of assets under management.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global
professional services company that helps organizations improve
performance through effective people, risk and financial
management. The company offers consulting, technology and solutions
in the areas of benefits, talent management, rewards, and risk and
capital management. Towers Watson has more than 14,000
associates around the world and is located on the web at
towerswatson.com.
Towers WatsonMedia Contacts:Binoli Savani, +1 703 258
7648binoli.savani@towerswatson.comorEd Emerman, +1 609 275
5162eemerman@eaglepr.com
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