Emerging market pension funds grow in prominence on the world stage

Total value of world’s largest 300 pension funds rises by 15.1% in 2017

GLOBAL, 3 September 2018 – Assets under management (AUM) at the world’s largest pension funds increased in value by 15.1% in 2017 to reach a total of $18.1 trillion, a significant increase from the 6.1% growth achieved in 2016, according to the latest global 300 research from Willis Towers Watson’s Thinking Ahead Institute.

The research, conducted in conjunction with Pensions & Investments, a leading U.S. investment newspaper, shows the top 20 funds account for 41.1% of the AUM in the ranking, marking a slight increase from 40.3% in the previous year. 

Emerging markets have become more prominent in the rankings in recent years, with the Employees’ Provident Fund (India) a new entrant into the top 20 in 2017. A total of four new entrants from emerging market countries have entered the top 20 over the last ten years, from Asia (3) and Africa (1). 

Roger Urwin, global head of investment content at Willis Towers Watson, said: “The increased number of the largest funds originating from emerging market regions is reflective of a longer-term trend, with a great deal of progress being made in terms of governance structures and resiliency. These countries are especially interesting to monitor as they are typically in the earlier stages of maturity and can continue to adapt and develop their investment models.”

Commenting on the findings, Bob Collie, head of research for the Thinking Ahead Group , added: “This is a period of extraordinary change for large pension plans, driven by a confluence of factors. It’s not just demographic change and the changing global economic balance; it’s not just changes in social expectations, politics, sustainability, or regulation; it’s not just technology. It’s all of these, and it’s the way the changes compound one another. Many of these organisations are fairly young and have grown rapidly. This puts a spotlight on their governance and how they operate.”

Among the top 300 funds, defined contribution (DC) assets increased during 2017 by 17.6% whilst defined benefit (DB) assets grew 13.5%. DB assets accounted for 64.7% of the disclosed total AUM, (down from 65.5% in 2016). 

The share of reserve funds (those set aside by a national government against future liabilities) saw a slight increase at 11.8% (11.5% in 2016), whilst hybrid funds (those with both DB and DC components) accounted for less than 1% of the total.

“Whilst the longer-term shift from DB to DC is widely understood and remains unchanged, it is striking that DB assets continue to grow and form the majority of the total assets. We see the hybrid market as an interesting area of the landscape to watch, with its growth expected to continue as asset owners shift away from traditional DB strategies,” Urwin added.

Sovereign and public sector pension funds account for 68.6% of the total assets, increasing by 0.2% from 2016.

North American funds remain the largest region in terms of AUM, accounting for 42.3% of all assets in the research, followed by Asia-Pacific (27.3%) and Europe (26.5%). North America shows the fastest annualised growth during the period 2012/17 at 6.2%, slightly outpacing Asia-Pacific’s 6.1% and Europe’s 3.8%.

A total of 26 new funds entered the top 300 over the last five years, with the U.S. contributing the greatest net number of new funds (9). The U.S. continues to have the largest number of funds within the top 300 ranking (133), followed by the U.K. (25), Canada (18), Japan and Australia (both 17).

On a weighted average for the top 20 funds, assets are predominantly invested in equities (46.3%), followed by fixed income (36.1%), and alternatives and cash (17.6%). Looking at the allocations by region, APAC funds had the largest allocation to fixed income (52.5%) and North American the largest allocation to alternatives (34.8%).

Top 20 pension funds (US $ millions)

 RankFundMarketTotal Assets 
1.Government Pension InvestmentJapan$1,443,554
2. Government Pension Fund Norway $1,063,456 
3. National Pension South Korea $582,938 
4. Federal Retirement Thrift U.S. $531,489 
5. ABP Netherlands $494,796 
6. National Social Security China $456,853 
7. California Public Employees U.S. $336,684 
8.Canada Pension Canada $283,454* 
9. Central Provident Fund Singapore $269,133 
10. PFZW Netherlands $235,995* 
11. California State Teachers U.S. $216,193 
12. Local Government Officials Japan $209,880 
13. New York State Common U.S. $201,263 
14. Employees Provident Fund Malaysia $200,265 
15. New York City Retirement U.S. $189,794 
16. Florida State Board U.S. $167,900 
17. Ontario Teachers Canada $150,730** 
18. Texas Teachers U.S. $146,326 
19. Employees’ Provident India $134,272
20. GEPF South Africa $133,944**

*As of March 31, 2018
**As of March 31, 2017

Australian press release.

Asia Pacific press release.

About the Thinking Ahead Institute

The Thinking Ahead Institute is a global not-for-profit member organisation whose aim is to influence change in the investment world for the benefit of savers. The Institute’s members comprise asset owners, investment managers and other groups that are motivated to influence the industry for the good of savers worldwide. It has 45 members with combined responsibility for over US$12 trillion and is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.