ANALYSIS

Largest pension funds get bigger

The world’s biggest funds are gaining even more market share, and arguably more influence, over the world’s pension capital. The largest 300 funds now account for 43.2 per cent of all global pension assets.

Further, the capital is becoming even more concentrated at the very top, with the largest 20 funds in the world accounting for 40.3 per cent of the assets of the Willis Towers Watson 300 ranking, the Pensions & Investments/Willis Towers Watson 300 Analysis for the year 2016 states.

The report shows that assets under management (AUM) at the world’s largest 300 funds totalled $15.7 trillion at the end of 2016, up by 6.1 per cent for the year.

The top 20 funds increased assets by an even greater proportion, 7.1 per cent, bringing their combined assets to about $6.9 trillion. These funds invest about 41.7 per cent of their assets in equities, 37.2 per cent in fixed income and 21.1 per cent in alternatives and cash.

North America remained the largest region in terms of AUM, with 44.1 per cent of all assets, including 134 US-based funds in the top 300. The Asia-Pacific region’s funds and European funds each accounted for 26.1 per cent of AUM in the top 300.

The Government Pension Investment Fund of Japan remains the largest fund in the world, with assets of more than $1.2 trillion at the end of December 2016.

The size of this fund is overwhelming, with its assets 39 per cent larger than the second fund in the ranking, the Government Pension Fund of Norway.

The P&I/WTW report states that, of the top 20 funds, nine emphasised the increased volatility and uncertainty in global markets. These funds mentioned several key factors to explain such high global market volatility.

“[The year] 2016 was truly an extraordinary investment year. Unexpected political events like Brexit and a new US administration as well as changed monetary policy signals from several central banks had a significant impact on financial markets,” said Bjarne Graven Larsen, chief investment officer of Ontario Teachers’ Pension Plan, which ranks number 18.

Despite the volatility, positive market returns for all major asset classes helped boost pension assets during the year.

 

2016 P&I/WTW 300 ranking (in $ million)

Rank Fund Market Total assets
1 Government Pension Investment Fund Japan $1,237,636
2 Government Pension Fund Norway $893,088
3 Federal Retirement Thrift US $485,575
4 National Pension Service South Korea $462,161
5 ABP Netherlands $404,310
6 National Social Security China $348,662
7 California Public Employees Retirement System US $306,633
8 Canada Pension Plan Canada $235,790
9 Central Provident Fund Singapore $227,102
10 PFZW Netherlands $196,461
11 California State Teachers Retirement System US $198,871
12 New York State Common US $184,461
13 Pension Fund Association for Local Government Officials Japan $183,161
14 New York City Employees’ Retirement System US $171,574
15 Employees Provident Fund Malaysia $165,464
16 State Board of Administration of Florida US $153,942
17 Teacher Retirement System of Texas US $133,221
18 Ontario Teachers’ Pension Plan Canada $130,642
19 Government Employees Pension Fund South Africa $119,186
20 ATP Denmark $113,160