The Thinking Ahead Institute’s report on this year’s 100 global asset owners provides insights into the state of institutional investing of assets worth a combined US$29.3 trillion, described as “the most influential capital on the planet”.
Norway’s $1.7 trillion Norges Bank Investment Management displaced Japan’s $1.6 trillion Government Pension Investment Fund as the world’s largest asset owner.
Overall, there was 11.3% year-on-year growth in total assets, with 49% held by pension funds, 40.8% by sovereign wealth funds, and 9.7% by outsourced chief investment officers and master trusts.
The concentration and consolidation of asset owners is remarkable. Within the top 100, the 20 largest account for 56.1% or $16.4 trillion of assets, while the top five within this peak group account for 24.7% or $7.2 trillion.
The report groups the most influential asset owners into key regional clusters: the Europe 9 with $3.5 trillion, the $3.9 trillion Gulf 5, the $2.8 trillion Public 8 from the US, the $1.7 trillion Canadian Maple 8, and the $700 billion Super 6 from Australia.
According to the report, these asset owners are linked by more than size – that they are converging in approach, often cooperating and together “shaping the direction of institutional investing”.
One distinguishing feature shared by these clusters is growing adoption of the total portfolio approach, described as a “holistic view of overall portfolio outcomes, not just individual asset class performance”, which should enable asset owners to use capital more efficiently towards their total objectives and achieve higher returns.
The approach does require some risky changes including new mindsets, reformed governance and greater collaboration, as outlined in report.
No matter how attractive the potential, it may be best suited to asset owners that have the resources to implement it. And it may widen the gap between the top 100 and other institutional investors even further, which may not be best for lesser pension funds and institutions or their stakeholders.
The report lists other differentiating features of these clusters, including a focus on resilience, preference for smarter partnership, deep connections with stakeholders and peers, and a co-creative approach to wealth generation.
Other asset owners who can implement or enhance such qualities should do so or be left further behind.
