World’s Top 300 Pensions Grow 6.1% in 2016

The world’s 300 largest pension funds saw a 6.1% increase in 2016, representing a total of $15.7 trillion, according to research by Willis Towers Watson.

Following a 3.4% decline in 2015, year-end 2016 figures showed a return to growth, while cumulative growth in assets is at 23.4% since 2011. The top 20 funds by asset size saw a higher boost than the overall ranking, increasing their assets by 7.1%. According to the report, these pensions now represent 43.2% of global pension assets, growing from 42.5% in 2015.

According to the data, the largest annualized growth rate over the last five years came from North American funds, growing 6.7% over the period. European and Asia-Pacific-based funds saw growth rates of 3.1% and 2.8%, respectively.

Within the top 300 funds, the US continued its rights as the country with the largest share of pension assets, representing 38.6% across 134 funds. Canada usurped the UK as the fifth-largest country by share of pension fund assets at 5.4% (up 0.1% from 2015). The UK fell from 5.4% of total assets in 2015 to 4.8% in 2016.

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Over the past five years, Willis Towers Watson found that 28 new funds entered the ranking, with the US contributing the most new funds on a net basis at 13. The highest net losses were experienced by Germany and Mexico, losing a net of four funds each. The country with largest number of funds within the top 300 is the US at 134, followed by the UK’s 26, and Canada’s 18. Rounding out the top five were Japan and Australia, who each had 16 funds.

“If asset owners are to successfully capture the long-term premium, it is imperative that they continue to expand their skill-sets, particularly in a continued lower-return environment which looks set to remain a feature of the industry going forward,” Roger Urwin, global head of investment content at Willis Towers Watson said in a statement. “A central characteristic of leader funds has been on their ability to innovate, rather than to rely on practices which may have worked in the past, whether that be through more streamlined asset allocation, uses of factor strategies and other smart betas, and better methods of accessing private markets. Increased interest in sustainability, both in integrated ESG practices and stronger stewardship practice, is one further innovation that was notable in 2016.”

In addition, Willis Towers Watson reported a 5.6% increase in defined benefit assets in 2016. Defined contribution plans, reserve funds, and hybrid funds also increased by 9.6%, 3.9%, and 2.9%, respectively. According to the research, DB assets accounted for 65.5% of the disclosed total assets under management, which is slightly down from 65.9% in 2015. DC assets have risen from 21.5% in 2015 to 22.2%. Reserve funds and hybrid funds are slightly down at 11.5% and 0.8%, respectively, compared to 2015’s respective 11.7%, and 0.9%.

Following a 0.8% decrease in 2015, sovereign pension fund assets bounced back, seeing a 6.5% growth over the period.

Tags: Pension, Willis Towers Watson, World's Largest Pensions

Chile’s Superintendency of Pensions reported that as of the end of the second quarter, the total value of assets under management of the country’s pension funds reached $190.07 billion, which represents an increase of 13.2% compared to the same period last year.

As of Q2, the funds’ investment in Chilean national assets represented 59.6% of the total assets under management, and were concentrated mainly in fixed income instruments. Meanwhile, foreign investments make up 40.4% of the total assets managed.

The quarterly report gives an overview of the investments of the pension funds, and breaks them down by domestic and international investment. The domestic investments are sorted by instrument, issuer, and transactions, while the international investments are sorted by instrument, issuer, foreign fund manager, geographical area and country, currency, and transactions.

Chilean investments accounted for $113.38 billion of the total assets under management in the second quarter, of which 83.1% was invested in fixed-income instruments. The main issuer of the fixed-income investments was the General Treasury of the Republic, where 32.3% of national investment is concentrated, or 19.3% of the total investment of the pension funds.

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During the quarter, pension funds made net purchases of instruments at the national level of $2.16 billion, of which $1.84 billion was in net purchases of fixed income instruments, and $324 million of net purchases was in instruments of variable income.

The Superintendency said the pension funds’ overseas investments reached $76.68 billion as of June. Equities were the main component of the foreign investment portfolio, with a 65.6% share of total assets abroad. The diversification by geographical area in the second quarter of 2017 shows that 32.7% of overseas investment is registered in emerging markets, 63.8% in developed markets, and 3.5% in other areas. Approximately 30.1% of foreign investment is registered in North America. The US remained the main destination country for investments, although its share of total assets decreased to 12% from 13.8%.

Tags: Chile, Pension, Superintendency of Pensions

Chile Reports 13.2% Hike for Pension Funds in Q2