Top pension fund assets rise strongly despite pandemic uncertainty

GLOBAL, 06 September 2021 – Assets under management (AUM) of the world’s top 300 pension funds increased by 11.5% to a total of US$21.7 trillion in 2020, according annual research conducted by the Thinking Ahead Institute, in conjunction with Pensions & Investments a leading U.S. investment newspaper. The research highlights high-level trends in the pension funds industry and provides information on how the characteristics of these funds have changed.

Marisa Hall, co-head of the Thinking Ahead Institute, reflects on key insights from the research: “Overall, the world’s largest pension funds grew strongly in 2020, yet the pandemic has also been a stark reminder of how the world is more interconnected and uncertain today than ever before. Pension fund boards are increasingly focused on managing many of the headwinds that have arisen from a ‘new normal’ of lower-for-longer interest rates, which has prompted concerns around solvency and led some schemes to increasingly stretch their risk budgets in order to meet return targets. Additionally, managing rising ESG expectations have created their own set of challenges and opportunities.

As a result, pension fund boards’ agendas have become more complex and demanding than at any previous time. While some larger funds use best-practice governance to retain a strategic focus in the face of this complexity and explore more dynamic investment models such as total portfolio thinking, other schemes are using this as an opportunity to review their governance models to ensure they remain sufficiently robust.
The shift in focus to meet the investment challenges of tomorrow – such as achieving net-zero targets and ensuring real-world impacts – is prompting an increasing number of pension fund boards to adopt a more holistic and agile approach as they revamp their people, investment and business models. Boards which are successfully managing this transition have employed the power of technology, governance and culture ingeniously. Other pension fund boards are taking notice.”

In 2020, North America remains the largest region in terms of AUM and number of funds, accounting for 41.7% of all assets in the study, followed by Asia-Pacific (27.5%) and Europe (27.5%). The Asia-Pacific region experienced the largest annualised growth rate over the last five years at 9.9%. Europe and North America had annualised growth rates of 7.8% and 7% respectively, while Latin American and African funds’ AUM increased 5.7% during the same period.
Overall, US continues to have the largest number of funds in the top 300 ranking (138), followed by the UK (23), Canada (18), Australia (16) and Japan (14). A total of 34 new funds entered the top 300 in the last five years, with the US contributing the greatest net number of new funds (7) – having had 15 funds leave the ranking and 22 join. In contrast, the UK had the highest net loss of funds (4) during the same period as DB schemes in the UK continue to mature.
Among the top 300 funds, DB fund assets continue to dominate at 63.4% of the total AUM. However, the share of DB fund assets has been declining modestly over the years, as DC funds, reserve funds and hybrid fund assets are slowly gaining traction.

DB schemes dominate in North America and Asia-Pacific where they represent 73.7% and 64.7% respectively. To a smaller degree, DB schemes also account for a majority of assets in Europe (52%), whereas DC plans dominate in other regions accounting for 72.5% of assets, particularly in Latin American countries.

According to the research, sovereign and public sector pension funds account for 68% of the total AUM in the research, with 141 funds of this type in the top 300. Corporate pension funds come in second, making up 17% of total AUM (with 101 funds); and finally, private independent funds which account for 15% of total AUM with 58 funds.

The research also shows that the top 20 pension funds’ AUM – which constitute 41.8% of the total – grew by a 14.6% in 2020; the second highest annual growth rate since 2004. This translates in a compound annual growth rate during the last five years of 8.9% for the top 20 and 7.9% for the top 300.

The top 20 fund assets are predominantly invested in equities (46.6%) followed by fixed income (36.3%) and alternatives and cash (17.1%) – on a weighted average basis. These funds have, in aggregate, slowly increased their allocation to alternatives during the past few years in order to meet return-target goals.

There was one new entrant in the top 20 funds in 2020. The Russian National Wealth Fund moved from 25 to 17 in the ranking, replacing the Texas Teachers pension fund, from the U.S., which dropped to 21 in the ranking.

Top 20 pension funds (US $ millions)*

RankFundMarketTotal Assets
1Government Pension InvestmentJapan$1,719,987
2Government Pension FundNorway$1,305,920
3National PensionSouth Korea$765,446
4Federal Retirement ThriftU.S.$651,124
6National Social SecurityChina$448,4271
7California Public EmployeesU.S.$426,247
8Canada PensionCanada$390,5032
9Central Provident FundSingapore$349,787
11California State TeachersU.S.$259,246
12Employees Provident FundMalaysia$248,203
13Local Government OfficialsJapan$248,094
14New York State CommonU.S.$226,400
15New York City RetirementU.S.$225,450
16Employees’ ProvidentIndia$193,8011
17National Wealth FundRussia$183,0023
18Florida State BoardU.S.$180,221
20Ontario TeachersCanada$173,741

2As of March 31, 2021
3As of Jan. 1, 2021

About the Thinking Ahead Institute
The Thinking Ahead Institute was established in January 2015 and is a global not-for-profit investment research and innovation member group made up of engaged institutional asset owners and asset managers committed to mobilising capital for a sustainable future. It has over 45 members around the world and is an outgrowth of the Willis Towers Watson Investments’ Thinking Ahead Group which was set up in 2002.