The finding has come from new research on the top 300 pension funds worldwide by Willis Towers Watson’s Thinking Ahead Institute.
Assets under management (AUM) globally increased to US$19.5 trillion in 2019, rising by 8 per cent compared to a 0.4 per cent decline the year before.
The top 20 pension funds saw their AUM rise by 8.1 per cent over the year, equating for 40.7 per cent of the total AUM in the rankings. The compound annual growth rate of the top 20 funds during the last five years was 5.5 per cent, compared to 4.9 per cent across all 300 funds for the same period.
Meanwhile super funds in Australia grew by 19.2 per cent for the year, with funds rising an average of 13 places through the global ranks.
Martin Goss, investments director for Willis Towers Watson Australia reported the performance from Australian funds had been aided by “relatively high allocations to growth assets and net positive cash flow, as many funds remain in a growth phase”.
The biggest Australian movers in the top 300 were Hostplus, which rose 46 places to 140th and recorded 40 per cent growth, AustralianSuper, the highest Australian fund gaining 10 places to place 23rd and growing by 29 per cent and Sunsuper, which recorded 29 per cent growth and rose 12 spots to 94th.
Future Fund retained its place of 29th in the world list, growing its AUM by 14 per cent to US$117.9 billion while First State Super slotted into 61st place with 14 per cent growth to US$71.9 billion.
The largest fund globally was Japan’s Government Pension Investment Fund, with US$1.5 trillion in assets, followed by Norway’s Government Pension Fund with US$1 trillion and South Korea’s National Pension with US$637.2 billion.
North America has remained the largest region in terms of AUM and number of funds, accounting for 43.8 per cent of all assets in the research, followed by the Asia Pacific, with 26.6 per cent of assets and Europe (25.8 per cent).
The APAC had the largest annualised growth rate in the last five years at 7 per cent, compared to 5.1 per cent in North America and 2.8 per cent in Europe.
Australia has the fourth-highest number of funds in the 300 ranking, with 16, following the US (142), the UK (23) and Canada (18).
Roger Urwin, cofounder of the Thinking Ahead Institute said the world’s largest pension funds had staged a strong rebound in growth in 2019, following a tough market environment in 2018.
“However, this positive result does not detract from the multiple pressures currently facing pension funds, from concerns around solvency levels to rising expectations with regards to ESG considerations, particularly concerning climate and social issues,” Mr Urwin said.
“Perhaps most notably of course, we are still witnessing ramifications from the COVID-19 crisis and as we anticipate further economic uncertainty in the months ahead, these challenges make pension fund boards’ agendas more complex and stressed than at any previous time.”
He added large funds are using “best-practice governance” to manage the complex agendas and retain their strategic focus.
“One of their top priorities now is harnessing the power of data and technology, an area where the pensions industry has generally lagged other areas of business and finance,” Mr Urwin said.
“Notwithstanding the significant costs of investing in new technologies and the challenges of managing data, these two areas are critical tools in improving the people, processes and information that will determine which funds prosper in the years ahead.”
Looking at weighted average allocations by region, US and European funds have predominantly invested in equities (43.9 per cent and 50.9 per cent respectively) while APAC funds have largely allocated assets to fixed-income investments (51.7 per cent).
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
