Defined benefit still dominates largest funds

Defined benefit funds still dominate the structure of the largest 300 pension funds globally, and this troop of large funds now make up almost half of all pension assets around the world.

The total assets of the world’s largest 300 pension funds grew by 11 per cent in 2010 to a total of $12.5 trillion, an all-time high, according to this year’s P&I/Towers Watson global 300 ranking.

Defined benefit funds still account for 70 per cent of assets, and grew by 8 per cent last year. Defined contribution funds grew by 11 per cent.

There is a geographical shift underway in the dominance of pension assets, and while the US still has the largest share of pension assets, with 34 per cent, this has declined from 45 per cent only five years ago.

Europe has had the highest five-year growth rate of 11 per cent.

An analysis of the annualised growth rates of the countries that make up the top 20 shows funds in China recorded a massive 38.9 per cent growth rate. The next largest was Norway with 18.5 per cent.

There was little shift in the rankings of the largest funds, with the Government Pension Investment Fund of Japan still the largest fund – at $1.4 trillion it is nearly three times the next largest – a position it has held for the past eight years.

Notable movements in the rankings were the Canada Pension Plan which moved from 12^th to 8^th; the GEPF of South Africa which moved from 18^th to 15^th; and the Ontario Teachers Pension Plan which moved in to the top 20 from 22^nd (it replaced the General Motors).

According to global head of investment at Towers Watson, Carl Hess, the asset allocation of these large funds has shifted to a more conservative status over the past five years. The top 20 funds, on average, now have an equal amount in equities and bonds (about 40 per cent in each) with the remainder in alternatives and cash, he says.

P&I/Towers Watson 300 ranking ($US millions)