Largest 300 pension funds grow 8% to $19.5 trillion

Assets under management (AUM) at the world’s 300 largest pension funds increased by 8% to $19.5 trillion in 2019, compared to a 0.4% decline the year before, according to the latest top 300 pension funds research from Willis Towers Watson’s Thinking Ahead Institute.

The research shows the value of the world’s biggest 20 pension funds’ assets also rose by 8.1% in the same period, equating to 40.7% of the total assets in the rankings, unchanged from the previous year. 

The compound annual growth rate of the top 20 funds during the past five years was 5.5%, compared to 4.9% for the top 300 funds during the same period. 

Roger Urwin, co-founder of the Thinking Ahead Institute, said: “Overall, the world’s largest pension funds staged a strong rebound in growth in 2019, following a tough market environment the year before.

“However, this positive result does not detract from the multiple pressures currently facing pension funds, from concerns around solvency levels, to rising expectations with regards to ESG considerations, and in particular climate and social issues.

“Perhaps most notably of course, we are still witnessing the ramifications from the covid-19 crisis and, as we anticipate further economic uncertainty in the months ahead, these challenges make pension fund boards’ agendas more complex and stressed than at any previous time.

“Large funds are typically using best-practice governance to manage these complex agendas and retain a strategic focus.

“One of their top priorities now is harnessing the power of data and technology, an area where the pensions industry has generally lagged other areas of business and finance.

“Notwithstanding the significant costs of investing in new technologies, and the challenges of managing data, these two areas are critical tools in improving the people, processes, and information that will determine which funds prosper in the years ahead.”

The share of “reserve” funds — those set aside by a national government against future liabilities — increased by 9.9%, whilst hybrid fund assets (those with both Defined Benefit and Defined Contribution components) increased by 11.7% during the year.

Sovereign and public sector pension funds account for 68.3% of the total assets in the research, with 144 funds of this type in the top 300.

Sovereign pension funds account for $5.6 trillion of the assets, while sovereign wealth funds account for $8.2 trillion.

North America remains the largest region in terms of assets and number of funds, accounting for 43.8% of all assets in the research, followed by Asia-Pacific (26.6%) and Europe (25.8%).

The US continues to have the largest number of funds in the top 300 ranking (142), followed by the UK (23), Canada (18), Australia (16) and Japan (13). 

On a weighted average for the top 20 funds, assets are predominantly invested in equities (45.4%) followed by fixed income (36.8%) and alternatives and cash (17.8%).

There were no changes in the composition of the top 20 funds in 2019.