Assets Under Management AUM

Global Pension Funds’ Combined Assets Under Management Reach Record High of $23.6 Billion

The combined assets under management (AUM) of the 300 largest pension plans have increased by 50% since 2016 to reach an all-time high of $23.6 billion in 2021, according to a study by the Thinking Ahead Institute (TAI).

As reported by our sister title, European pensionsthe survey showed that while total assets under management reached record highs, growth slowed from 11.5% in 2020 to 8.9% in 2021.

However, the TAI suggested that this “was to be expected after a very strong performance of asset markets in 2020”, pointing out that the latest performance is sufficient to lift five-year cumulative growth to 50.2%.

The survey also found that the United States is now home to almost half of the world’s largest pension funds, up from 41.7% at the end of 2020.

European pension schemes, meanwhile, accounted for 25.9%, Asia-Pacific 25.5%, while the remaining 4% were based in Latin America and Africa.

The increase in North America’s global share was attributed to faster annualized growth in invested assets, which rose 9.2%, compared to 8.3% in Europe.

As a result, the US also accounted for 36.9% of the assets under management of the top 300 pension funds and almost half of the funds in the ranking, followed by the UK.

Defined benefit (DB) fund assets continued to dominate among the top 300 funds, at 63.5% of total assets under management.

However, the TAI noted that the asset share of DB funds has slightly decreased in recent years, while defined contribution (DC) funds (23.8%), reserve funds (11.8%) and Hybrid fund assets (0.9%) are slowly gaining traction.

TAI also found that the top 20 pension funds now made up 41% of total assets, down slightly from 41.8% a year earlier, having increased 6.6% during the year, against 8.9% for the top 300 funds.

However, over the longer term, the top 20 funds have experienced a higher growth rate, with a compound annual growth rate (CAGR) for the last five years of 8.8% compared to 8.5% for the top 300 funds. .

On average, the top 20 funds invested around 53.5% of their assets in equities, 27.9% in fixed income securities and 18.6% in alternatives and cash.

Commenting on the results, TAI co-director Marisa Hall said, “It’s a two-part story. On the one hand, a new record for the world’s major pension funds illustrates the optimism that has defied a global pandemic. Yet on the other, growth is slowing and the long-term scoreboard is flashing orange.

“Going forward, rising inflation and subsequent central bank action are likely to weaken global growth, which in turn could put the funding status of equity funds at risk in the longer term. pension.

“Pension funds are also under immense governance pressure from all sides, with growing politicization of ESG in some regions responding to calls for more substantial and urgent climate action.

“Adding strong short-term economic pressures alongside these long-term structural changes will only add to the difficulty of balancing short-term financial resilience with long-term financial and climate sustainability.”

Hall also said pension fund board agendas have “rightly become a guide to the complex strategic challenges facing global markets and economies”, suggesting that reading the funds’ annual reports is “also a lesson in potential solutions to these major challenges”.

“Most are concerned about increasing market volatility and are discussing other ways to increase diversity in their investments, especially in the face of the global economic downturn,” sh continued.

“And most are now campaigners for best practices in corporate governance, aimed at ensuring lasting value.

“It is clear that pensions can be a positive force to help overcome the world’s great challenges, but also a barometer of the big questions we all face in the coming decades.