The total assets of the world’s largest 300 pension funds grew by almost 10% last year, up from 2% in the previous year, to a new high of $14 trillion (€10.6 trillion).
Together, these 300 pension funds represent over 47% of global pension assets.
Research from consultancy Towers Watson shows last year’s growth in assets was among the highest recorded in recent years; similar to 2010, when the growth rate reached 11%, but not the 14% recorded in 2007.
Carl Hess, global head of investment at Towers Watson, says that even though there was “healthy” growth throughout last year, the annualised growth rate for the past five years is just over 3%.
“[This] is probably not enough to ensure they all meet their obligations absent capital injections,” Hess says. “Indeed some most probably will not, particularly in what is predicted to be a low-growth, volatile and highly competitive marketplace for some time yet.”
Asia Pacific has had the highest five-year compound growth rate of 7%, compared to a growth rate of 6% in Europe and a reduction of 1% in North America. Although the Latin American and African regions combined have a growth rate of around 11%, Towers Watson notes that they are growing from a low base.
Hess says the rise in pension assets in 2012 was a result of investment market recovery and new cash commitments. “There were many similarities to the year before – bumpy recovery accompanied by occasional hyper-volatility in markets - but with some notable differences which are cause for some encouragement for the first time in five years,” Hess adds.
The largest pension fund in the world, with almost $1.3 trillion of assets under management, is the Government Pension Investment fund in Japan, followed by the Government Pension Fund in Norway ($0.7 trillion) and the ABP in the Netherlands ($0.4 trillion).
In the top ten are the National Pension fund in South Korea, the Federal Retirement Thrift fund in the US, the California Public Employees fund, the Local Government Officials fund in Japan, the Central Provident Fund in Singapore, the Canada Pension fund and the National Social Security fund in China.
Completing the list of the top 20 are PFZW in the Netherlands, the Employees Provident Fund in Malaysia, the California State Teachers fund, the New York State Common fund, the New York City Retirement fund, the Ontario Teachers fund, the ATP in Denmark, the GEPF in South Africa and the Pension Fund Association in Japan.
Defined benefit (DB) funds account for 69% of total assets, down from 75% five years ago. Assets held in those funds grew by around 8%, compared to around 12% for defined contribution assets (DC) and 18% in reserve funds.
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