LONDON - Monday 9 September, 2013 - Total assets of the world’s largest 300 pension funds grew by almost 10% in 2012 (compared to around 2% in 2011) to reach a new high of US$14.0 trillion (up from US$12.7 trillion in 2011), according to Pensions & Investments and Towers Watson research. The P&I / Towers Watson global 300 research, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, shows that last year’s growth in assets was among the highest recorded in recent years; similar to 2010 (11%) but not the exceptional growth of 14% recorded in 2007.

By individual region, Asia-Pacific has had the highest five-year compound growth rate of 7% compared to Europe (6%) and North America (-1%); while the Latin American and African regions combined have a growth rate for the same period of around 11%, albeit from a low base. The research also shows that the world’s top 300 pension funds now represent over 47% of global pension assets1.

According to the research, defined benefit (DB) funds account for 69% of total assets, down from 75% five years ago. During 2012, DB assets grew by over 8% (1% in 2011) compared to around 12% for defined contribution assets (DC) (6% in 2011), while reserve funds2 grew by almost 18% (1% in 2011).

Carl Hess, global head of Investment at Towers Watson, said: “The rise in pension assets in 2012 was a combination of investment market recovery and new cash commitments. There were many similarities to the year before – bumpy recovery accompanied by occasional hyper-volatility in markets - but with some notable differences which are cause for some encouragement for the first time in five years.”

According to the research, the US remains the country with the largest share of pension fund assets accounting for 35%. Japan has the second-largest market share of around 15% (17% in 2011), largely because of the Government Pension Investment Fund. That fund, which is still at the top of the ranking (a position it has held for the past ten years), has assets of around US$1.3 trillion and maintains a conservative asset allocation. The Netherlands has the third-largest market share with 7%, while Canada and the UK are fourth and fifth largest respectively with over 5% share each.  The research shows that 40 new funds entered the ranking during the past five years and, on a net basis, Australia and Germany contributed the most new funds, four and three respectively, followed by Poland (2), Russia (2), Peru (2) and Colombia (2). During the same period, the US had a net loss of 17 funds from the ranking, yet it still accounts for 124 funds in the research. The UK is the next highest with 26 funds, followed by Canada with 19, Japan with 17 and Australia with 15.

Carl Hess said: “Despite healthy growth in 2012, these pension funds’ annualised growth rate for the past five years is just over 3%, which is probably not enough to ensure they all meet their obligations absent capital injections. Indeed some most probably will not, particularly in what is predicted to be a low-growth, volatile and highly competitive marketplace for some time yet. The recent relative stability is very welcome and should be encouraging for investors – however they should not become too complacent given that the big issues, like the Eurozone crisis, the US fiscal cliff and appalling indebtedness, have not gone away.”

The research shows that assets held by Australian funds grew at the fastest rate during the five-year period to the end of 2012, 13% in US$ terms, followed by Taiwan funds at 11%. During the same period the top Danish,  Mexican and Brazilian funds grew at 9%, 7% and 5% respectively, in US$ terms.

Sovereign funds3 continue to feature strongly in the ranking with the 26 of them accounting for 28% of assets and totalling around US$4.0 trillion. The 107 public sector funds in the research had assets of US$5.3 trillion in 2012 and account for 38% of the total. Private sector industry funds (61) and corporate funds (106) account for 14% and 20% respectively of assets in the research.

Carl Hess said: “While there is a diversity of pension systems around the world, each at varying stages of development, they all have in common the need to achieve future returns in a challenging investment environment. We believe that only those with the very best governance arrangements can take full advantage of their size and time frame to make the most of what is beginning to look like a sustained, if weak, growth path.”

Top 20 pension funds - (US$ millions)

Rank Fund Country Region 2012 AUM
1. Government Pension Investment Japan Asia-Pacific $1,292,003
2. Government Pension Fund Norway Europe $712,606
3. ABP Netherlands Europe $372,860
4. National Pension South Korea Asia-Pacific $368,450
5. Federal Retirement Thrift U.S. North America $325,682
6. California Public Employees U.S. North America $244,754
7. Local Government Officials Japan Asia-Pacific $201,443 1
8. Central Provident Fund Singapore Asia-Pacific $188,430
9. Canada Pension Canada North America $184,425 1
10. National Social Security China Asia-Pacific $177,486
11. PFZW Netherlands Europe $177,311 1
12. Employees Provident Fund Malaysia Asia-Pacific $175,720
13. California State Teachers U.S. North America $155,739
14. New York State Common U.S. North America $150,110
15. Florida State Board U.S. North America $134,345
16. New York City Retirement U.S. North America $132,071
17. Ontario Teachers Canada North America $130,198
18. ATP Denmark Europe $129,009
19. GEPF South Africa Other $122,225 2
20. Pension Fund Association Japan Asia-Pacific $119,199

1 - As of March 31, 2013
2 - As of March 31, 2012

Sovereign pension funds - (US$ millions)

Rank Fund Market Total assets  
1. Government Pension Investment Japan $1,292,003  
2. Government Pension Fund Norway $712,606  
3. National Pension South Korea $368,450  
4. Central Provident Fund Singapore $188,430  
5. Canada Pension Canada $184,425 1
6. National Social Security China $177,486  
7. Employees Provident Fund Malaysia $175,720  
8. GEPF South Africa $122,225 2
9. National Wealth Fund Russia $88,064  
10. Future Fund Australia $85,546  
11. Fondo de Reserva Seguridad Spain $81,857  
12. Employees' Provident India $68,138 2
13. Labor Pension Fund Taiwan $53,099  
14. Public Institute for Social Security Kuwait $53,036 1
15. FRR France $48,301 1
16. AP Fonden 3 Sweden $36,746  
17. AP Fonden 2 Sweden $36,403  
18. AP Fonden 1 Sweden $35,561  
19. AP Fonden 4 Sweden $34,767  
20. Zilverfond Belgium $25,304  
21. State Pension Finland $20,269  
22. National Pensions Reserve Ireland $20,059 2
23. AP Fonden 7 Sweden $18,468  
24. FEFSS Portugal $14,443  
25. Fonds de Comp./Securite Sociale Luxembourg $13,620  
26. New Zealand Superannuation New Zealand $13,078 3

1 - As of March 31, 2013
2 - As of March 31, 2012
3 - As of June 30, 2012

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Footnotes

1 Estimation based on the P&I / Towers Watson global 300 ranking and Towers Watson Global Pension Asset Study.
2Reserve funds are set aside by a National government to guarantee pension payments and are characterised by no explicit liabilities and hence are neither DB nor DC.
3 As established by national authorities for the meeting of pension liabilities.  We acknowledge that there are many other state-sponsored funds established – we have attempted to restrict this to funds specifically sponsored by national authorities.