Asia-Pacific (APAC) pension funds beat their peers in terms of asset value growth in 2019, showed a report on the world’s top 300 pension funds by the Thinking Ahead Institute.
Assets under management (AUM) of the top 20 pension funds grew 8.1 per cent year-on-year in 2019, led by a 10.6 per cent growth in the assets of APAC funds. The AUM of funds in the US and Europe, within the top 20, rose by 2.9 per cent and 8.6 per cent, respectively.
The APAC region accounted for 44 per cent of assets managed by the 20 biggest funds last year, compared with 43 per cent in 2018, the research showed.
The Government Pension Investment Fund of Japan remained perched on top as the world’s largest pension fund, with $1.6 trillion in AUM. This is over 40 per cent more than the second-biggest fund, the Government Pension Fund of Norway, which has $1.1 trillion in AUM.
Many Asian funds in the list improved their ranking by one notch compared with 2018. This includes The National Pension Fund of South Korea (Rank 3), Singapore’s Central Provident Fund (Rank 8), Malaysia’s Employees Provident Fund (Rank 12) and Employees’ Provident in India (Rank 17).
Top 20 pension funds (in $ million)*
|2018 Rank||2019 Rank||Fund||Market||Total Assets|
|1||1||Government Pension Investment Fund||Japan||$1,555,550|
|2||2||Government Pension Fund||Norway||$1,066,380 ¹|
|4||3||National Pension Fund||South Korea||$637,279|
|3||4||Federal Retirement Thrift||US||$601,030|
|6||6||California Public Employees||US||$384,435|
|7||7||National Social Security Fund||China||$361,087 ¹|
|9||8||Central Provident Fund||Singapore||$315,857|
|8||9||Canada Pension||Canada||$315,344 ²|
|11||11||California State Teachers||US||$243,311|
|13||12||Employees Provident Fund||Malaysia||$226,101|
|15||13||Local Government Officials||Japan||$224,006|
|12||14||New York State Common||US||$215,424|
|14||15||New York City Retirement||US||$208,458|
|16||16||Florida State Board||US||$173,769|
|18||17||Employees’ Provident||India||$168,095 ¹|
* US funds’ data is as of September 30, 2019.
* Non US funds’ data is as of December 31, 2019, except where shown:
² As of 31 March 2020
On a weighted average for the top 20 funds, assets are predominantly invested in equities (45.4 per cent), followed by fixed income (36.8 per cent) and alternatives and cash (17.8 per cent). Based on weighted average allocations by region, APAC funds had the largest portfolio of fixed income investments (51.7 per cent), while North American and European funds have mainly invested in equities (43.9 per cent and 50.9 per cent, respectively).
Overall, the world’s 300 largest pension funds witnessed an 8 per cent increase in value in 2019, in contrast to the 0.4 per cent decline the year before. They now collectively manage $19.5 trillion in assets. APAC holds the second largest share in terms of assets managed by the top 300 pension funds (26.6 per cent), behind North America (43.8 per cent).
Funds in the APAC region experienced the fastest annualised growth in the five-year period since 2014 (7 per cent), compared with 4.9 per cent for the top 300 funds. The top 20 funds clocked 5.5 per cent average growth in 2014-19.
“Asia-Pacific pension funds have experienced exceptional growth over the last five years compared to their North American and European counterparts,” noted Jayne Bok, head of investments in Asia at advisory company Willis Towers Watson. Thinking Ahead Institute is the research arm of UK-based Willis Towers Watson.
“However, the road ahead is looking increasingly uncertain, with geopolitical tensions, climate crises and the ongoing COVID-19 pandemic making financial markets increasingly volatile,” he continued, adding that funds can diversify their portfolios by increasing allocations to new and emerging asset classes such as Chinese equities, which “have proven to be highly resilient during COVID-19”, as well as Environmental, Social, and Governance (ESG) investments.
“Large funds are typically using best-practice governance to manage these complex agendas [caused by COVID-19 and economic uncertainty] and retain a strategic focus,” said Roger Urwin, co-founder of the Thinking Ahead Institute.
“One of their top priorities now is harnessing the power of data and technology, an area where the pensions industry has generally lagged other areas of business and finance. Notwithstanding the significant costs of investing in new technologies, and the challenges of managing data, these two areas are critical tools in improving the people, processes, and information that will determine which funds prosper in the years ahead,” he added.