Largest Asian pension funds gain prominence on the world stage

Asia featured prominently with a total of seven pension funds in the top 20, according to the latest global 300 research from Willis Towers Watson’s Thinking Ahead Institute. Their combined assets under management (AuM) accounted for $3.3 trillion, surging by 25.6% during 2017 and representing 44.3% of assets in the top 20. Within the Global 300, the AuM of all Asia Pacific pension funds (49) increased by 20% to almost $5 trillion in 2017, outpacing the Global 300 funds’ overall increase of 15.1%.

Jayne Bok, head of investments for Asia at Willis Towers Watson, said: “Strong performance gains especially in this region during 2017 helped boost many Asian pension funds. However, uncertainties over geo-political and economic events that led to increasing market volatility in 2018 are seen as headwinds to Asia and some emerging markets. We are living in a world with no easy answers for investors and plenty of stormy seas ahead. As the economic cycle continues to mature and the risks of a recession increase, funds with a long-term horizon should consider a broader opportunity set by looking beyond their home region and mainstream asset classes in order to maximise diversity and create resiliency. It is a good time to review portfolios now and how they would perform under different risk scenarios.”

Among 49 Asia Pacific pension , including corporate pension plans in the Global 300, sovereign and public sector pension funds with a total of 32 funds had combined assets of US$4.4 trillion in 2017 and accounted for 24.5% of the total assets. There are 14 domiciled in the Asian (ex Japan) region, 10 in Japan, 7 in Australia and 1 in New Zealand.

Jayne commented: “The past 12 months has been a period of change for large pension funds. We saw Asian sovereign and public sector pension funds seeking or taking actions to diversify investments as reflected by new mandates awarded to their asset managers. Examples include sustainability-linked or ESG portfolio, global infrastructure, multi-asset, absolute or total return strategy, private market investments, alternative credit and more overseas investing. This also puts a spotlight on their governance and how they operate.”

Among the top 20 funds in the research, India’s Employees' Provident entered into the top 20 during 2017, moving up to the 19th spot (from 21st). Korea’s National Pension (3rd), Japan’s Local Government Officials (12th) and Malaysia’s Employees Provident Fund (14th) climbed up one place from their previous year’s ranking position. Both China’s National Social Security Fund (6th) and Singapore’s Central Provident Fund (9th) retained its previous position in the ranking. Japan’s Government Pension remained at the top of the ranking, where it has been since 2002.

Jayne added: “The increased number of the largest funds originating from the Asian region is reflective of a longer-term trend. Some progress has been made in terms of governance structures and resiliency but there is much more that needs to be done. These countries are especially interesting to monitor as they are typically in the earlier stages of maturity and can continue to adapt and develop their investment models.”

North American funds remained the largest region, accounting for 42.3% of all assets in the research, followed by Asia Pacific (27.3%) and Europe (26.5%). The U.S. continues to have the largest number of funds within the top 300 ranking (133), followed by the U.K. (25), Canada (18), Japan and Australia (both 17). There are 14 funds in other Asia-Pacific markets.

Among the top 300 funds, defined contribution (DC) assets increased during 2017 by 17.6% whilst defined benefit (DB) assets grew 13.5%. DB assets accounted for 64.7% of the disclosed total AUM, (down from 65.5% in 2016). The share of reserve funds (those set aside by a national government against future liabilities) saw a slight increase at 11.8% (11.5% in 2016), whilst hybrid funds (those with both DB and DC components) accounted for less than 1% of the total.

Re-dessiminated by The Asian Banker

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