Global Asset Allocators Continued to Grow in 2021, Hitting Almost $26 Trillion

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.

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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

Florida’s CFO freezes assets managed by BlackRock and says by early 2023, the state will have divested fully from the world’s largest asset manager.

State Chief Financial Officer Jimmy Patronis announced Thursday that the Florida Treasury will begin divesting $2 billion worth of assets currently under management by BlackRock.

BlackRock managed $1.43 billion of Florida’s long duration portfolio, which includes investments such as corporate bonds, asset-backed securities and municipal bonds. Additionally, BlackRock managed $600 million of Florida funds in a short-term treasury fund, which invests in short-term and overnight investments.

Patronis cited efforts by BlackRock and its CEO, Larry Fink, to embrace environmental, social and governance investment principles as the reason Florida will pull the funds from the manager.. In the wake of the announcement, the state will freeze the $1.43 billion in long-term securities at its custodial bank.

Patronis’ announcement follows a vote in August by the State Board of Administration of Florida trustees to ban ESG considerations from the state asset allocator’s investment decisions.

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By the beginning of 2023, the state treasury intends to divest from BlackRock’s management of all short- and long-term investments and relocate investment responsibilities to other fund management entities, Patronis said..

“(Fink) has championed ‘stakeholder capitalism’ and believes that ‘capitalism has the power to shape society.’ To meet this end, the asset management company has leaned heavily into Environmental, Social, and Governance standards – known as ESG – to help police who should, and who should not gain access to capital,” Patronis said in a statement. “Whether stakeholder capitalism, or ESG standards, are being pushed by BlackRock for ideological reasons, or to develop social credit ratings, the effect is to avoid dealing with the messiness of democracy. I think it’s undemocratic of major asset managers to use their power to influence societal outcomes. … Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.”

Patronis’ announcement follows Missouri treasurer Scott Fitzpatrick divesting $500 million, Utah treasurer Marlo Oaks pulling $100 million and Louisiana treasurer John Schroder divesting $794 million worth of state funds, all formerly managed by BlackRock. The treasurers argue that ESG investing is contrary to their fiduciary responsibilities, because they say it may compromise maximizing financial returns.

“It’s my responsibility to get the best returns possible for taxpayers,” Patronis said in the statement. “The more effective we are in investing dollars to generate a return, the more effective we’ll be in funding priorities like schools, hospitals and roads. As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are – and I don’t trust BlackRock’s ability to deliver. As Larry Fink stated to CEOs, ‘Access to capital is not a right. It is a privilege.’ As Florida’s CFO, I agree wholeheartedly, so we’ll be taking Larry up on his offer.”