Assets at world’s largest pension funds return to growth

ARLINGTON, Va., Sept. 05, 2017 -- Assets under management at the world’s largest pension funds increased in value by 6.1% in 2016, representing a total of $15.7 trillion, according to the latest global 300 research from Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company. The figures for year-end 2016 show a return to growth, following a 3.4% decline in 2015, while cumulative growth in assets since 2011 now stands at 23.4%. The top 20 funds by asset size in the research experienced a higher increase than the overall ranking, growing assets by 7.1% over the period. The research shows that the world’s top 300 pension funds together now represent 43.2% of global pension assets, rising from 42.5% in 2015, as estimated against figures from Willis Towers Watson’s Global Pensions Asset Study.

“The search for attractively priced assets at acceptable risk continues to be a driving force in shaping the fortunes of pension funds and their ability to meet respective missions and objectives,” said Steve Carlson, head of Investment, North America, Willis Towers Watson. “This is increasingly hard and reduces the shine from a year in which the largest asset owners have been able to achieve superior growth. Central to this result has been the ability of leading asset owners to adapt to the ever-changing investment environment, through improvements in governance and the ability to learn from their peers. The desire of asset owners to implement best practices and sound governance has strengthened and will be a key factor in their future success.”

According to the research, North American funds showed the most noticeable annualized growth rate over the last five years, growing by 6.7% during the period. Funds from Europe and Asia Pacific regions showed annualized growth rates of 3.1% and 2.8% respectively. The U.S. continues to hold its position as the country with the largest share of pension assets across the top 300 funds, representing 38.6% spread across 134 funds. Meanwhile, Canada has overtaken the U.K. as the fifth largest country by share of pension fund assets, accounting for 5.4% (5.3% in 2015). The U.K. now accounts for 4.8%, falling from 5.4% of total assets in 2015.

A total of 28 new funds have entered the ranking over the last five years, with the U.S. contributing the most new funds (13) on a net basis. Germany and Mexico experienced the highest net losses over the period, losing a net four funds each. The U.S. has the largest number of funds within the top 300 ranking (134), followed by the U.K. (26), Canada (18), Japan and Australia (both 16).

“If asset owners are to successfully capture the long-term premium, it is imperative that they continue to expand their skill sets, particularly in a continued lower return environment, which looks set to remain a feature of the industry going forward,” said Carlson. “A central characteristic of leader funds has been their ability to innovate rather than rely on practices that may have worked in the past, whether that be through more streamlined asset allocation, uses of factor strategies and other smart betas, or better methods of accessing private markets. Increased interest in sustainability, both in integrated environmental, social and governance practices and stronger stewardship practice, is one further innovation that was notable in 2016.”

Defined benefit (DB) assets increased by 5.6% in 2016, compared with 9.6% for defined contribution (DC) plans, 3.9% for reserve funds and 2.9% for hybrid funds. DB assets account for 65.5% of the disclosed total advanced utilization management, down from 65.9% in 2015, while DC assets have increased their share, rising from 21.5% in 2015 to 22.2%. Reserve funds remain relatively unchanged at 11.5% (11.7% in 2015), as do hybrid funds (0.8%, falling from 0.9% in 2015).

Sovereign pension fund assets returned to growth in 2016, swelling by 6.5% over the period. This follows a decrease of 0.8% in 2015.

Top 20 pension funds (US$ millions)

Largest sovereign pension funds (US$ millions)

           
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Willis Towers Watson’s Investment business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 colleagues worldwide, assets under advisory of over US$2.3 trillion and over US$87 billion of assets under management.

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 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.

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