Top Global Pension Funds Assets Exceed $15 Trillion by Tower Watson
Executive summary
- Assets under management (AUM) of the world’s largest pension funds totalled US$15.4 trillion in 2014.
- Funds’ AUM increased by 3.4% in 2014, compared to 6.2% in 2013.
- The top 20 funds had a growth rate of 3.9% in 2014, a slightly higher increase than the overall ranking.
- North America remained the largest region in terms of AUM, accounting for 43.2% of all assets in the research.
- Europe was the second-largest region (28.5%), followed by Asia-Pacific (24.1%).
- North America experienced the most noticeable annualized growth during the period 2009-2014 (7.6%), continuing the good performance since the 2008 recession. Europe and Asia-Pacific showed growth rates of 7.1% and 3.9%, respectively.
- The US accounted for 128 of the funds in the ranking. Since 2009, it has seen nine of its funds drop out from the top 300, while 10 new funds joined the ranking.
- Sovereign and public sector pension funds accounted for 66.9% of the total assets, with 141 funds in the top 300.
- Defined benefit (DB) funds accounted for 66.8% of the total assets in the ranking. DB assets grew by 3.7% in 2014, compared to 4.7% for defined contribution (DC) plans, 1.4% for reserve funds, and a decrease of 2.5% for hybrids.*
- On an arithmetic average basis, the top 20 funds invested approximately 39.5% of their assets in fixed income securities, 42.2% in equities, and 18.3% in alternatives and cash.
- North American funds have predominantly invested in equities while there was a higher interest for fixed income in Asia-Pacific funds.
Section 1: Total value of assets
- During 2014, the world’s top 300 pension funds experienced a growth of 3.4% (6.2% in 2013) in terms of assets under management.
- The cumulative growth in the period 2009-2014 was 36.2%.
- The world’s top 300 pension funds represented 42.6% (43.7% in 2013) of the global pension assets, as estimated by GPAS*.
- The AUM for the top 20 pension funds increased by 3.9% during the last year, a slightly higher increase than the overall ranking.
- The top 20 funds accounted for 39.4% of the AUM in the ranking, similar to the last five years.
Major movements in top 20 funds
- There was one new entrant in the top 20 funds during 2014, ATP (Denmark), replacing Pension Fund Association (Japan).
- The Government Pension Investment Fund of Japan remained at the top of the ranking, where it has been since 2002, with AUM totalling US$ 1,144 billion in 2014. This fund is almost 30% larger than the second fund in the ranking, the Government Pension Fund of Norway (US$ 884 billion).
- Within the top 20, the share of US pension funds continued to increase, moving from 23.9% to 25.2% over the last year. This share is still much lower than its pre-crisis level (36% in 2007).
- Asia-Pacific funds’ share was 39.7%, down from 43.1% in 2013. This decrease is partially explained by the exit of the Pension Fund Association of Japan from the top 20.
- On the contrary, Europe’s share increased from 25.2% to 27.1% in the same period.
Quotes from the top 20 funds
- 15 out of the top 20 published annual reports in English on their websites for FY2014.
- Nine of the funds emphasized the volatility and uncertainty in global markets. In line with this, 11 funds highlighted portfolio diversification as a key strategy for their investment performance.
- Eight funds highlighted the strong performance of the equity market in the past year.
- Nine funds stated that returns were affected by low interest rates, and five funds also mentioned the fall in oil prices in the fourth quarter of 2015 as a relevant factor affecting performance.
- Five funds expressed concern about the ageing populations and increasing life expectancy as potential threats for the sustainability of the pension plans.
Section 2: Growth rates
- The AUM of the top 20 funds increased by 3.9% in 2014, compared to 3.4% for the overall ranking.
- Looking at the CAGR for the last five years, the top 20 and 300 funds have shown similar growth rates (6.5% and 6.4%, respectively).
- A total of 25 new funds have entered the ranking over the last five years.
- The US accounts for 128 funds in the ranking. This country has experienced significant movements in the period 2009-2014 with nine funds leaving the ranking and 10 newcomers in the top 300.
- On a net basis, the countries with more funds entering the ranking during the same period were UK and South Korea (two funds), while Germany and Japan experienced the highest net losses (three funds).
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