05 September 2017
London
Reporter: Drew Nicol

World’s pension funds return to form in 2016


The world’s largest pension funds increased their assets under management (AUM) by 6.1 percent in 2016, worth $15.7 trillion, according Willis Towers Watson.

As part of Willis Towers Watson research into the world’s 300 largest pension funds, it revealed that return to growth in 2016, following a 3.4 percent decline in assets in 2015.

Cumulative growth in assets since 2011 now stands at 23.4 percent.

The top 20 funds by asset size saw a higher increase than the overall ranking, with a 7.1 percent boost to AUM since 2011.

The world’s top 300 pension funds together now represent 43.2 percent of global pension assets, rising from 42.5 percent in 2015.

Sovereign pension fund also returned to growth in 2016, increasing assets by 6.5 percent and reversing a decrease of 0.8 percent in 2015.

By region, North American funds grew strongest with a 6.7 percent asset increase over the past five years, with the US market retaining the largest share of pension assets worth 38.6 percent of the global pot spread across 134 funds.

Canada has overtaken the UK as the fifth largest country by share of pension fund assets, accounting for 5.4 percent, up from 5.3 percent in 2015, of global assets. The UK holds 4.8 percent, down from 5.4 percent in 2015.

Funds in Europe and the Asia Pacific showed boasted growth rates of 3.1 percent and 2.8 percent respectively.

In terms of asset diversity, 28 new funds entered the ranking over the past five years. The US accounted for 13 on a net basis, while Germany and Mexico experienced the highest net losses over the period, losing a net four funds each.

The US has the largest number of funds within the top 300 ranking (134), followed by the UK (26), Canada (18), and Japan and Australia (both 16).

Roger Urwin, global head of investment content at Willis Towers Watson, said: “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.”

“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.”

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