Pensions Account for 61% of Top 100 Asset Owners

The top 100 asset owners account for more than one-third of all global capital held by their peers, with pension funds holding the largest concentration of money.

At roughly $19 trillion, the 100 largest asset owners hold almost 35% of the world’s $55 trillion assets under management, and nearly 61% of the list’s ranks are pension funds, according to Willis Towers Watson’s Thinking Ahead Institute, which conducted the report.

The top 10 funds in the world are Japan’s Government Pension Investment Fund ($1.4 trillion), Norway’s Government Pension Fund ($1.06 trillion), South Korea’s National Pension Service ($582.9 billion), the Federal Retirement Thrift Investment Board ($531.48 billion), China’s National Social Security Fund ($341.3 billion), the California Public Employees Retirement System ($336.6 billion), the Canada Pension Plan Investment Board ($283.4 billion), Singapore’s Central Provident Fund ($269.1 billion), and the Netherlands’ PGGM ($262.2 billion).

In addition to owning 60.8% of all ranking assets, retirement organizations also control 67% of the total funds on the list. The average pension assets accounted for about $170 billion. The average for all funds was $187 billion.

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The remaining 39.2% of the top 100 asset owners are occupied mostly by sovereign wealth funds (32%), as well as outsourced chief investment officers and master trusts (7.2%).

As for regions, the largest region in assets under management was Asia Pacific (36%), with Europe, the Middle East and Africa (34%), and North America (30%) trailing closely.

Roger Urwin, global head of investment content at the Thinking Ahead Institute, said these large-scale institutions “have little choice but to take their financial and social responsibilities seriously, and not to shirk the big issues” as they are movers and shakers that can influence the global economy.

Urwin also said the top 100 asset owners need to understand the world they operate in over the next decade, meaning they should be “doing more to institutionalize professionalism, streamline operating models, leverage culture and diversity more effectively, and evolve the investment model into increasingly smart and sustainable arrangements.”

Tags: Asset Owners, Pension, Thinking Ahead Institute, Top 100 Asset Owners, Willis Towers Watson

Five UK-based FTSE 100 companies paid more into their pension plans during the fiscal year that ended Mar. 31 than they declared in dividends to shareholders during the period, according to JLT Employee Benefits.

“The inherent tension between funding pension obligations and paying dividends persists across the UK’s blue-chip index, but the tide is starting to turn among some sponsors,” Charles Cowling, JLT Employee Benefits’ chief actuary, said in a release.

“It is encouraging to see schemes acknowledging the balance sheet risks presented by unfunded pension obligations and taking action to shore up their position,” Cowling added. “The companies with the biggest pension funding problems are slowly getting to grips with it.”

During the same period in 2017, six companies contributed more to their pension plans than they paid out in dividends JLT said, adding that 37 companies could have settled their pension deficits in full with a payment of up to one year’s dividend.

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JLT said that 53 of FTSE 100 corporate plan sponsors reported significant pension deficit funding contributions in their most recent annual reports, as companies continued to offset balance sheet risks with cash injections. However the total of £14.8 billion ($19.5 billion) that was paid into pension plans during the year was down from the £17.4 billion paid during the previous fiscal year. According to JLT, this was £6.6 billion more than the cost of benefits accrued during the year, and therefore represented £8.2 billion of funding toward reducing pension deficits.

“Corporate sponsors are committing significant capital to their pension scheme through cash injections and are clearly weighing up the need to return value to shareholders against improving their funding position,” said Cowling.

And although there is still a significant difference between what UK companies are paying out in dividends versus what they are paying in pension contributions, an August report from UK consultancy Barnett Waddinham found that the gap between the two appears to be leveling out.

“Our research shows that, in 2017, the median of deficit contributions as a proportion of net dividend payments remained unchanged from the previous year, and has been relatively stable since 2014,” said the report. “In the relatively positive economic environment over recent years, it would appear that the FTSE350 companies have started to settle upon a favored allocation of dividends and deficit contributions.”

However, that allocation still heavily favors dividend payouts over pension deficit contributions, according to the report. Barnett Waddinham said that over the past year, FTSE350 companies paid more than seven times as much in dividends to shareholders than they contributed to their employees’ pension plans, doling out £66 billion in dividends to just £8.7 billion in pension contributions.

“The allocation of capital is never a straightforward decision for companies, and it is even more complicated for companies with a large DB scheme,” said the report. “Following the recent high-profile failures of BHS and Carillion … these decisions are coming under increased scrutiny, particularly the allocation of resources between shareholders and DB pension schemes.”

Tags: FTSE 100, JLT Employee Benefits, Pension, UK