The 20 largest pension funds of the globe
The total assets of the 300 largest pension funds worldwide increased by about 6% in 2016 to $15.7 trillion. Worryingly for the UK, not one of the nation’s pension funds made the top 20 of the list, with Britain now accounting for just under 5% of the global pension pot.
Annually updated research by Willis Towers Watson has revealed that the 20 largest pension funds together hold about 43.2% of total global pension assets. This further consolidation of resources from 2015, when they accounted for 42.5%, is mainly the result of stronger growth among the major players in the pension landscape – while compound growth in the top 20 has risen 7.1% more than the average (based on equity).
Looking at the main countries where pension funds are housed, the United States maintained its grip on the top rank, with a 38.6% share. Seven of the top 20 pension funds are based in the US. Composite growth was highest across the North American continent in general over the last five years, with a growth of 6.7% in the measured period. Pension funds in Europe and Asia-Pacific grew by a slower 3.1% and 2.8%, respectively. Reflecting this, Canada usurped the UK as the country with the fifth highest collective pension fund, accounting for 5.4% of the global sum. The UK, which saw its percentage fall from 5.4% to 4.8% since 2015, is now some distance behind fellow its European economy of the Netherlands, the third ranked locale, on 6.4%.
Last year only one British scheme made the top 50. The BT Group which has accumulated $68 billion to ensure it can pay employees past and present sufficient retirement income was followed by the Universities Superannuation Scheme (USS), with big banks’ and utility companies’ schemes close behind. While BT may have only just made the top 50, the study’s lower sections were loaded with UK pensions in 2015, as they were this year.
The BBC, with around 20,000 employees, ranked in the top 300, thanks to a war chest of over $20 billion meanwhile, in contrast to Tesco, with 500,000 workers, yet much further down the list due its mere $16 billion fund.
According to Roger Urwin, Global Head of Investment Content at Willis Towers Watson, there are differences in performance between funds across Europe. Pension funds with a Defined Benefit (DB) scheme grew by 5.6% in 2016, defined contribution plans (Defined Contribution) by 9.6% and reserve funds by 3.9%. In the hybrid pension funds there was a growth of almost 2.9%. After a 0.8% decline in 2015, state funds again grew by 6.5% in 2016.
Urwin said, "This result is mainly due to the fact that the largest pension funds managed to adapt to the changes in the investment climate. They implemented improvements in the board and competitors learned from each other. Implementing best practices and sound policies within the organisations has strengthened the position of pension funds. This will also play a major role in determining their success in the future.”
In future, pension funds are advised to continue to innovate in the face of increasing competition and even disruption. Urwin concluded, "For example, innovation can be through streamlined asset management, investment strategies focused on smart beta or factor investing, and better ways to access private markets. Sustainability, both in the field of ESG (environmental, social and governance factors) as ownership responsibilities, is an innovative trend that we saw in 2016."
Related: De-risking sees European pension assets move to bonds from equities.
