Major pension funds saw assets grow 10% in 2012
10 September 2013
News, Asia, China, Global
By Asia Asset Management
Total assets of the world’s largest 300 pension funds grew by almost 10% in 2012 (compared to around 2% in 2011) to reach a new high of US$14 trillion (up from $12.7 trillion in 2011), according to Towers Watson and P&I research. The research shows that last year’s growth in assets was among the highest recorded in recent years; similar to 2010 (11%) but not the exceptional growth of 14% recorded in 2007.
Naomi Denning, managing director of investment services for Asia Pacific at Towers Watson, said: “The rise in global 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 China’s National Social Security Fund (NSSF) entered the top ten ranking for the first time, becoming one of the five Asian pension funds in this group. Among the top 20 funds the NSSF had the greatest growth rate, in US dollar terms, of around 30% in 2012. It first entered the top 20 ranking in 2009, while the other four largest Asian funds retained their previous positions in the ranking.
Ms. Denning said: “The rapidly ageing population in China will require the National Social Security Fund to continually grow its assets in order to help with meeting the rising pension liabilities. The fund is likely to grow significantly in the next five years, largely driven by new funding from the central government and capital transfer from state-owned enterprises, and as a result we expect to see it move rapidly up the ranking, perhaps into the top three, during this period.”
According to the research, the Asian funds that feature in the top 20 ranking are Japan’s Government Pension Investment Fund (first), Korea’s National Pension Fund (fourth), Japan’s Local Government Officials (seventh), Singapore’s Central Provident Fund (eighth) and China’s National Social Security Fund (up from 13th to tenth position). Malaysia’s Employee Provident Fund exited the top ten and is now ranked 12th, while Japan’s Pension Fund Association moved down to 20th from 18th. The research also shows that Asia-Pacific pension funds have around 46% of the top 20 funds’ total assets, down from 49% in 2011.
In the research, Japanese pension funds generally declined in US dollar terms during 2012. Two Japanese funds, including one public sector fund, exited the top 300 ranking. In contrast, Asia-Pacific pension funds in the ranking, in aggregate, experienced double-digit growth last year of 19% in US dollar terms.
Ms. Denning said: “Last year the deliberate devaluation of the yen to boost liquidity and export competitiveness caused the growth rates, in US dollar terms, to be much lower for Japanese funds, particularly those with high allocations to domestic fixed income.”
During the five-year period to the end of 2012, assets held by Australian funds grew at the fastest growth rate, 13% in US dollar terms, followed by Taiwan funds at 11%. By individual region, Asia-Pacific has had the highest five-year compound growth rate of 7% compared to Europe (6%) and North America (-1%); while the Latin American and African regions combined have a growth rate for the same period of around 11%, albeit from a low base.
North America still remains the region with the largest share of pension fund assets in the research accounting for around 40%, followed by Europe (28%) and Asia-Pacific (26%). The research also shows that the world’s top 300 pension funds now represent over 47% of global pension assets, based on the P&I / Towers Watson global 300 ranking and Towers Watson Global Pension Asset Study.
By fund category, the 28 Asia-Pacific sovereign and public sector pension funds in the research had assets of $3.3 trillion in 2012 and accounted for around 24% of the total assets, a decrease of 1% compared to 2011. Other sovereign and public sector funds (105 in other regions) in the research account for 42% of the total. Private sector industry funds (61) and corporate funds (106) account for 14% and 20% respectively of assets in the research.
Ms. Denning said: “While there is a diversity of pension systems around the world, each at varying stages of development, they all have in common the need to achieve future returns in a challenging investment environment. We believe that only those with the very best governance arrangements can take full advantage of their size and time frame to make the most of what is beginning to look like a sustained, if weak, growth path.”
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