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Global pension assets jump in 2012
09 September 2013
Top funds return to strong growth, finds Towers Watson Global 300 survey
Combined assets of the world's top 300 pension funds grew to $14trn in 2012, a rise of almost 10% from the year before, the P&I/Towers Watson Global 300 survey has found.
This growth compares to just 2% in 2011, when assets stood at $12.7trn.
Towers Watson found that over the past five years, Latin American and African regions saw growth of 11%, although the consultant noted this was from a low base. Elsewhere, Asia-Pacific has had the highest growth rate (7%), with Europe a close second (6%). North American funds performed poorly over the period, with negative growth of -1%.
Towers Watson estimated that the global 300 now accounted for just under half (47%) of global pension fund assets, with defined benefit (DB) funds accounting for over two thirds (69%). While DB funds still dominate global assets, this was down from three quarters (75%) in 2007.
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.”
Towers Watson found the US accounted for the majority of funds in the top 300, with 124 funds in the research, despite 17 funds falling out of the ranking, and 35% of assets. Japan has the second-largest market share of around 15%, largely because of the bond-heavy $1.3trn Government Pension Investment Fund.
The UK had the next highest number of funds, at 26, but was fifth overall for assets with 5% - the same proportion as Canada's funds – while The Netherlands has the third-largest market share with 7% of assets.
Carl Hess said that despite “healthy growth” the average annualised growth rate over the past five years was just over 3%, “which is probably not enough to ensure they all meet their obligations absent capital injections”.
Towers Watson said sovereign funds had grown in importance, with the 26 sovereign funds on the list accounting for 28% of assets ($4.0trn), while public sector funds also continued to be a vital aspect of pension fund assets, accounting for over a third of the list (107 funds) and $5.3trn in assets, or 38% of the total.