Assets under management (AUM) at the world’s top 300 pension funds increased by 8.9% to reach a record $23.6trn (£20.5trn) in 2021, the Thinking Ahead Institute has revealed.
The not-for-profit group – which was founded by Willis Towers Watson (WTW) – also found that North America now accounts for 45.6% of assets of the 300 largest pension funds, up from 41.7% at the end of 2020.
European pension funds account for 25.9%, and Asia-Pacific 25.5%, with the remaining 4% from Latin America and Africa.
While total AUM reached record highs, growth slowed from 11.5% in the previous year, which was expected after a very strong performance in asset markets over 2020. However, this still takes five-year cumulative growth to 50.2% in the period between 2016-2021.
Marisa Hall, co-head of the Thinking Ahead Institute, described the findings as a “story of two halves”. She explained: “On the one hand, a new record for the world’s major pension funds illustrates the optimism that defied a global pandemic.
“Yet on the other, growth is slowing and the long-term dashboard is flashing amber. Looking ahead, rising inflation and subsequent central bank action are likely to cause global growth to falter, which may in turn endanger the longer-term funding status of pension funds.”
North America’s increased global AUM share was largely powered by the fastest annualised growth in invested assets, up 9.2%. Europe, the Asia-Pacific, and Latin America and Africa saw growth of 8.3%, 8% and 3.9%, respectively.
The US now accounts for 39.6% of top 300 pension fund AUM and has almost half the funds in the ranking, with 148. It is followed by the UK, Canada, Australia, the Netherlands and Japan, on 23, 18, 15, 12, and 11, respectively.
Among the top 300 funds, defined benefit fund assets continue to dominate at 63.5% of the total AUM. However, defined contribution funds , reserve funds and hybrid fund assets are slowly gaining traction, on 23.8%, 11.8% and 0.9%, respectively.
Hall concluded: “We expect private markets will continue to expand considerably in the investment space over the long term, reflecting a need for new primary investment to support new models of sustainable economic growth.
“It’s clear that pensions can be a force for good to contribute to overcoming the substantial challenges in the world, but also a barometer of major questions we all face over the coming decades.”
Image credit: iStock
Author: Chris Seekings