The total assets of the 300 largest pension funds worldwide in 2015 decreased by more than 3% (against a growth of more than 3% recorded in 2014), reaching a total value of 14.8 trillion Euros. Despite this decline, the first since the onset of the global financial crisis, the cumulative growth in savings since then is almost 19%. This is what emerges from the annual Pensions & Investments survey by Willis Towers Watson.
The analysis, conducted in collaboration with the American magazine Pensions & Investments, shows how at a regional level the Funds in North America in the last 5 years have had the highest growth rate (about 6%) compared to the Funds in Europe (4 %) and in Asia (about 1%). Furthermore, the assets of the top 300 pension funds represent approximately 42% of global pension assets.
The survey shows that in 2015 defined benefit (DB) funds fell by almost 5%, while defined contribution funds fell by more than 2%.
“The volatility of managed assets, combined with ever-increasing liabilities – comments Alessandra Pasquoni, Willis Towers Watson Head of Investment Consulting in Italy – testify to how difficult it has become for pension funds to meet their missions. Large investors can take advantage of this complex and ambiguous volatility to improve their decision-making processes. It is now clear that good governance is the determining factor for producing a competitive advantage in ever-changing contexts”.
The research, which for the first time contemplates an Italian investor among the top 300 global funds, shows that the United States remains the country with the largest share of assets among pension funds (38%), followed by Japan (12%), Netherlands (6%), Norway (6%) and United Kingdom (5%). Additionally, 27 new funds have entered the rankings over the past five years and, on a net basis, the United States contributes the most funds (10), followed by the United Kingdom, South Korea, Australia, France, Peru, Vietnam and Italy (entered the survey just this year). During the same period, Mexico had the largest net loss of funds from the rankings (four funds), followed by Switzerland, Germany and Japan (3). The United States has the most research grants (131), followed by the UK (27), Canada (19), Australia (16), Japan (15) and the Netherlands (12).
“There have been several changes in the ranking of Pension Funds in the last five years – continues Pasquoni – the best performances derive from fully diversified portfolios that perform well in times of stress and with a focus on final rather than relative returns. Another differentiator of Leader funds is their ability to innovate or pioneer – this is important in an environment of persistent low growth. New considerations have been made on how to manage costs efficiently by implementing a mix between external and internal human capital. This has had the positive effect for the industry as a whole by shaping the proposition of active management while controlling its cost growth”.
Sovereign pension funds (27) continue to strongly dominate the ranking, accounting for 28% of assets and totaling around €4.6 trillion. The 115 in the public sector, in 2015, had assets of almost 6,6 billion euros and represent 39% of the total.
“The investment scenario is changing rapidly – concludes Pasquoni – as most investors are reviewing their governance to become more efficient in their investment processes. 20 years ago the use of delegation to external companies was prevalent, while now we are witnessing a growth in internal skills and better investment practices usually associated with achieving a good balance between internal resources and external delegations. Strengthening resources is also enabling these investors to be more aware of their responsibilities, opportunities and social impact.”
