Showing a strong forward momentum, the world’s 100 largest asset allocators saw assets grow 9% last year, a slowing from 2020’s growth rate, 16%. Total assets reached $25.7 trillion in 2021, according to new research by WTW’s Thinking Ahead Institute.
Pension funds are the largest component of the group, accounting for 56% of total assets, slightly down from 58% the previous year. Sovereign wealth funds have seen their share rise to 37%, up from 35% the previous year. This is the fifth year of the WTW study.
The Government Pension Investment Fund of Japan is still the biggest asset owner at $1.7 trillion, with two sovereign wealth funds in second and third: Norges Bank Investment Management ($1.4 trillion) and China Investment Corporation ($1.2 trillion). The biggest U.S. institution listed was California Public Employees’ Retirement System, in 12th place with $497 billion.
The top 20 asset owners control $14.1 trillion, a majority (55%) of the top 100’s allocated assets. Such concentration has been the case since the survey started.
Due to the turmoil the world has been through of late, the WTW study showed that many allocators are uncertain about how to deal with a nebulous future, yet they maintain tight discipline to prepare for whatever may come.
“With the macro being complex and uncertain, long-horizon investing principles provide a crucial set of guardrails,” the report commented.
Among problems that the survey respondents list are cybersecurity and a shortage of talent. The report spotlighted the recent problems with the British pension system, contending that the “most recent liquidity crisis associated with the liability-driven investment funds in the U.K. DB market raised questions about the future of defined benefit schemes.” The survey also found that hybrid working arrangements have “resulted in weakened culture and declined social capital.”
Allocators are increasingly focused on environmental, social and governmental matters, the report found. It observed that “some asset owners are stepping up and moving beyond the impact of ESG risks on the portfolio to consider the impact of the portfolio and the assets on the world.”
Asset owners “have a distinctive opportunity to contribute to real-world systemic change by contributing to a Paris [Agreement]-aligned future, consistent with net-zero emissions by 2050,” commented Roger Urwin, co-founder of the Thinking Ahead Institute, in a statement.
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Tags: asset allocators, California Public Employees’ Retirement System, Cybersecurity, Defined benefit (db) pension plans, ESG, Japan Government Pension Investment Fund (GPIF), WTW Thinking Ahead Institute