Global Pension Funds’ AUM Only Up 3.4% in 2014: Towers Watson

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Government planners and financial policy experts have been worried about the health of large pension funds both in the U.S. and worldwide for some time. A September 2015 report from global professional services firm Towers Watson examines the topic of pension fund performance in 2014. Highlights of the TW report that examines the top 300 pension funds include total global pension fund assets under management topping $15.4 trillion as of year-end 2014. That said, pension funds AUM only increased by 3.4% last year, compared to 6.2% in 2013.

Global pension fund AUM growth

The top 300 pension funds worldwide did see AUM growth last year, but the 3.4% rate of growth was barely half the rate seen the prior year.

Also of note, the cumulative growth rate for the five year period from 2009 to 2014 was a robust 36.2%. This period, of course, does include several years when the stock market moved up significantly as it was recovering from the damage done in the 2007-2008 financial crisis.

TW’s GPAS study suggests that the 300 largest pension funds accounted for 42.7% of the total global pension assets in 2014. That figure is down slightly from 43.2% a year earlier (2013).

More on top 20 pension funds in 2014

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The top 20 largest funds in the GPAS study moved up at a slightly above average 3.9% last year. Moreover, the top 20 funds represented 39.4% of the total AUM in the group. That figure has remained almost unchanged for five straight years.

The Government Pension Fund of Japan remained the largest pension fund by far, with a staggering AUM of $1,144 billion at the end of 2014. Of note, the GPFJ is more than 30% bigger than the second place Government Pension Fund of Norway with an AUM of $884 billion last year.

The share of both American and European pension funds within the top 20 continued to move up in 2014, with the U.S. hitting 25.2% and Europe increasing to a solid 27.1%.

Of interest, the Pension Fund of Japan slipped out of the top 20 last year and was replaced by Norway’s APT fund. The Pension Fund of Japan dropping out of the top 20 also explains most of the Asia-Pacific region’s drop from 43.1% of the top 20 funds’ AUM to just 39.7%.

pension funds

The TW report also notes that the five-year CAGR of the top 20 funds at 6.4% very closely mirrors that of the full set of 300 pension funds at 6.5%.

Breakdown of top 300 funds by country

pension funds

While only one new fund entered the TW top 300 list last year, 25 new funds have broken in over the last five years. The countries with the most new funds entering the rankings from 2009 to 2014 were the UK and South Korea with two funds each. Germany and Japan saw the most net losses during the period at three funds each.

As of 2014, 128 of the 300 funds on the list are based in the U.S. The United States saw nine pension funds drop out of the ranking over the last five years, but also saw 10 new funds join the list for a net add of plus one.

See full study below.

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