- The top 300 largest pension funds have seen assets grow cumulatively by 50% since 2016.
- The
U.S. is now home to almost half of the world’s largest pension funds. - However, a majority of pension funds now cite future strategic challenges due to rising growth headwinds.
While total AuM has reached record highs, growth has slowed from 11.5% in 2020 to 8.9% in 2021. This was to be expected after a very strong performance in asset markets over 2020; however, the latest performance is enough to take five-year cumulative growth to 50.2% in the period between 2016 and 2021.
“Looking ahead, rising inflation and subsequent central bank action are likely to cause global growth to falter, which may in turn endanger longer term the funding status of pension funds.
“Pension funds are also under immense governance pressure from all sides, with a growing politicization of ESG [environmental, social and governance] in some regions meeting calls for more substantial and urgent climate action. The addition of stark short-term economic pressures alongside these structural long-term changes will only add to the difficulty of balancing short-term financial resilience with long-term financial and climate sustainability.”
North America’s increased global share was largely powered by the fastest annualized growth in invested assets, up 9.2%, followed by
The
Among the top 300 funds, defined benefit (DB) fund assets continue to dominate at 63.5% of the total AuM; however, the share of DB fund assets has been declining modestly over the years, as defined contribution (DC) funds (23.8%), reserve funds (11.8%) and hybrid fund assets (0.9%) are slowly gaining traction.
DB pension funds dominate in
According to the research, the top 20 pension funds now constitute 41.0% of the total assets, slightly down from the prior year (41.8%) having grown 6.6% during the year compared with 8.9% for the top 300 funds; however, on a longer-term basis, the top 20 have a higher growth rate, with a compound annual growth rate (CAGR) for the past five years of 8.8% versus 8.5% for the top 300 funds. On average, the top 20 funds invested approximately 53.5% of their assets in equities, 27.9% in fixed-income securities, and 18.6% in alternatives and cash.
“We’re seeing asset allocation continue to respond to long-term structural shifts. While allocations to private markets declined compared with the previous year, we believe this was mostly caused by shorter-term inflationary and rate-hike fears. We expect private markets will continue to expand considerably in the investment space over the long term, reflecting a need for new primary investment to support new models of sustainable economic growth.
“Pension fund boards’ agendas have rightly become a guide to the complex strategic challenges facing global markets and economies. Reading the annual reports of the world’s very largest pension funds is also a lesson in potential solutions to these major challenges. The majority are concerned about growing market volatility and discussing further ways to boost the diversity of their investments, specifically in the context of global economic slowdown. And most are now campaigners for best practice in corporate governance, aimed at ensuring sustainable value.
“It’s clear that pensions can be a force for good to contribute to overcoming the substantial challenges in the world, but also a barometer of major questions we all face over the coming decades,” concluded Hall.
Top 20 pension funds (US$ millions)
Rank | Fund | Market | Total assets |
1 | 1,730.900 | ||
2 | 1,437.111 | ||
3 | National Pension | 797.968 | |
4 | Federal Retirement Thrift | 774.176 | |
5 | ABP | 630.358 | |
6 | California Public Employees | 496.820 | |
7 | Canada Pension | 426.7461 | |
8 | National | 406.7872 | |
9 | 374.990 | ||
10 | PFZW | 315.467 | |
11 | California State Teachers | 313.940 | |
12 | 267.756 | ||
13 | New York City Retirement | 266.702 | |
14 | Local Government Officials | 248.572 | |
15 | 242.602 | ||
16 | 213.792 | ||
17 | Texas Teachers | 196.727 | |
18 | Ontario Teachers | 191.140 | |
19 | 180.6903 | ||
20 | 169.0554 |
- As of
March 31, 2022 - Estimate
- As of
January 1, 2022 - As of
June 30, 2021
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