Top Pension Funds See Growth In 2012

By Editorial 12 September, 2013

The total assets of the world's largest 300 pension funds grew by almost 10 percent in 2012 (compared to around 2 percent in 2011) to reach a new high of USD14 trillion (up from USD12.7 trillion in 2011), according to Pensions & Investments and Towers Watson research.

The research shows that last year's growth in assets was among the highest recorded in recent years; similar to 2010 (11 percent) but not the exceptional growth of 14 percent recorded in 2007.

Asia-Pacific was the region with the highest five-year compound growth rate (7 percent), followed by Europe (6 percent). North America's pension fund assets declined by 1 percent in the same period. Meanwhile, the Latin American and African regions combined experienced a growth rate for the same period of around 11 percent, albeit from a low base. The research also shows that the world's top 300 pension funds now represent over 47 percent of global pension assets.

According to the research, defined benefit (DB) funds account for 69 percent of total assets, down from 75 percent five years ago. During 2012, DB assets grew by over 8 percent (1 percent in 2011) compared to around 12 percent for defined contribution assets (DC) (6 percent in 2011), while reserve funds grew by almost 18 percent (1 percent in 2011).

Carl Hess, global head of Investment at Towers Watson, said: "The rise in pension assets in 2012 was a combination of investment market recovery and new cash commitments. There were many similarities to the year before – bumpy recovery accompanied by occasional hyper-volatility in markets - but with some notable differences which are cause for some encouragement for the first time in five years."

The research shows that the US remains the country with the largest share of pension fund assets, accounting for 35 percent. Japan has the second-largest market share, of around 15 percent (17 percent in 2011), largely because of the Government Pension Investment Fund. That fund, which is still at the top of the ranking (a position it has held for the past ten years), has assets of around USD1.3 trillion. The Netherlands has the third-largest market share with 7 percent, while Canada and the UK are fourth and fifth largest respectively with over 5 percent share each.

The research shows that 40 new funds entered the ranking during the past five years and, on a net basis, Australia and Germany contributed the most new funds, four and three respectively, followed by Poland (2), Russia (2), Peru (2) and Colombia (2). During the same period, the US had a net loss of 17 funds from the ranking, yet it still accounts for 124 funds in the research. The UK is the next highest with 26 funds, followed by Canada with 19, Japan with 17 and Australia with 15.

Carl Hess said: "Despite healthy growth in 2012, these pension funds' annualized growth rate for the past five years is just over 3 percent, which is probably not enough to ensure they all meet their obligations absent capital injections. Indeed some most probably will not, particularly in what is predicted to be a low-growth, volatile and highly competitive marketplace for some time yet. The recent relative stability is very welcome and should be encouraging for investors, however they should not become too complacent given that the big issues, like the Eurozone crisis, the US fiscal cliff and appalling indebtedness, have not gone away."

Assets held by Australian funds grew at the fastest rate during the five-year period to the end of 2012 (13 percent in US dollar terms) followed by Taiwan funds at 11 percent. During the same period the top Danish, Mexican and Brazilian funds grew at 9 percent, 7 percent and 5 percent respectively, in US dollar terms.

Sovereign funds continue to feature strongly in the ranking with the 26 of them accounting for 28 percent of assets and totalling around USD4 trillion. The 107 public sector funds in the research had assets of USD5.3 trillion in 2012 and account for 38 percent of the total. Private sector industry funds (61) and corporate funds (106) account for 14 percent and 20 percent respectively of assets in the research.

Tags: Russia | Investment | Netherlands | Public Sector | Australia | Colombia | Taiwan | Brazil | Canada | Germany | Peru | Poland | Japan | Expats | Investment | Pensions | Europe | Asia-Pacific | Invest | North America | Africa | Investment | Pensions |


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