The world’s 300 largest pension funds saw their assets under management increase by 8.9% to a record $23.6 trillion in 2021, according to a report by WTW’s Thinking Ahead Institute.
The Government Pension Investment Fund of Japan remained at the top of the list as the world’s largest pension fund for the 20th consecutive year, with assets of over $1.73 trillion. Norway’s government pension fund Global was second with just under $1.44 trillion, and South Korea’s national pension fund was third with just under $800 billion.
Despite the asset record, growth slowed to 11.5% in 2020. However, the WTW report indicates that this should be expected after the strong performance of the markets in 2020. Still, it was enough to increase the cumulative growth to 50.2% over the five-period from 2016 to 2021.
“On the one hand, a new record high for the world’s leading pension funds illustrates the optimism that has defied a global pandemic,” Marisa Hall, co-director of the Thinking Ahead Institute, said in a statement. “Yet, on the other hand, growth is slowing and the long-term dashboard is flashing orange.”
According to WTW research, North America accounts for 45.6% of the assets of the world’s 300 largest pension funds, up from 41.7% at the end of 2020. European pension funds represent 25.9% and Asian funds – Pacific 25.5%, while Latin America and Africa account for the remaining 4%.
Nearly half (148) of the top 300 pension funds are from the United States and account for nearly 40% of total assets under management. The UK comes far behind with 23 pension funds on the list, followed by Canada (18), Australia (15), the Netherlands (12) and Japan (11).
Defined benefit fund assets continue to represent the majority, 63.5%, of total assets; however, this share has gradually declined over the years as defined contribution funds (23.8%), reserve funds (11.8%) and hybrid fund assets (0.9%) have slowly increased their part.
The top 20 pension funds now represent 41.0% of total assets, down slightly from the previous year, and invested on average around 53.5% of their assets in equities, 27.9% in securities fixed income and 18.6% in alternatives and cash.
“While allocations to private markets declined from the prior year, we believe this was primarily driven by inflationary and rising short-term rate fears,” Hall said. “We expect private markets to continue to expand significantly in the long-term investment space, reflecting a need for new primary investments to support new models of sustainable economic growth.”
She added that the majority of pension funds are concerned about increasing market volatility and are looking for additional ways to increase the diversity of their investments, especially in the face of the global economic downturn.
“Looking ahead, rising inflation and subsequent central bank action are likely to weaken global growth, which in turn could put the funding status of equity funds at risk in the longer term. pension,” Hall added. “Pension funds are also under immense governance pressure from all sides, with growing politicization of ESG in some regions responding to calls for more substantial and urgent climate action.”
Top 20 pension funds
|Funds||Market||Total assets ($MM)|
|1||Government investment in pension plans||Japan||$1,730,900|
|2||Government pension fund||Norway||$1,437.111|
|3||National pension||South Korea||$797,968|
|4||Federal retirement savings||WE||$774,176|
|6||California Public Employees||WE||$496,820|
|8||National Social Security||China||$406,7872|
|9||Central provident fund||Singapore||$374,990|
|11||California State Teachers||WE||$313,940|
|12||New York State Municipality||WE||$267,756|
|13||Retirement in New York||WE||$266,702|
|14||Local government officials||Japan||$248,572|
|15||Employees’ provident fund||Malaysia||$242,602|
|16||Florida State Council||WE||$213,792|
|19||National Wealth Fund||Russia||$180,6903|
1As of March 31, 2022; 2Estimate; 3As of January 1, 2022; 4As of June 30, 2021
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Tags: Defined Benefit Pension Plan, Defined Contribution, Top 300 Global Pension Funds, Japan Government Pension Investment Fund, Marisa Hall, Thinking Ahead Institute