The COVID-19 pandemic may have disrupted markets around the world, but a new report reveals that pension fund assets grew vigorously in 2020.
According to the annual joint study by the Thinking Ahead Institute and Pensions & Investments, the assets under management (AUM) of the world’s 300 largest pension funds increased by 11.5% in 2020, an increase of 3.5% compared to compared to 2019. Additionally, the top 20 pension funds made up 41.8% of total assets under management in 2020, up 1.1% from the previous year.
The study indicates that North America was the largest region in terms of number of funds and assets under management, accounting for 41.7% of all assets. Asia-Pacific and Europe follow, each representing 27.5% of assets. Asia-Pacific led the regions in terms of annualized growth rate over the past five years, at 9.9%.
During this period, the report notes, a total of 34 new funds entered the top 300, with the United States leading the charge with a net number of seven new funds, 15 funds leaving the ranking and 22 joining. The US has the most funds in the top 300 with 138, followed by the UK (23), Canada (18), Australia (16) and Japan (14).
Defined benefit (DB) plans dominate the list, particularly in North America and Asia-Pacific, accounting for 73.7% and 64.7% respectively. Overall, DB represents 63.4% of total assets under management. The study claims that defined contribution funds, reserve funds and hybrid fund assets have also gained ground over the years.
The study shows that the assets of the top 20 funds are mainly invested in equities (46.6%), followed by fixed income securities (36.3%) and alternative investments and cash (17.1%). Overall, however, these funds have slowly broadened their allocation to alternatives over the past few years to meet return targets.
Of the 10 funds that published annual reports in English on their websites, seven highlighted the importance of responsible and sustainable investing, recommending the implementation of best practices in corporate governance. “As we are the stewards responsible for ensuring the sustainability of the scheme, environmental, social and governance issues are at the top of the agenda,” read a statement from Ontario Teachers, Canada. “To that end, the board supported a new climate change policy that commits Teachers’ to achieving net-zero greenhouse gas emissions by 2050. Social issues such as gender equality Gender and racial equality are also increasingly prominent in boardroom discussions. Teachers’ ranks 20th on the study’s Top 300 list.
See our slideshow above for the top 10 pension funds in the world, and Click here for the full report.