Global Investment Matters

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Largest The world’s 300 pension funds

Total assets of the world’s 300 largest pension funds appeared to bounce back modestly in 2002 after their heavy falls of the previous year. Assets of the 300 at the end of 2002 totalled $5.5 trillion compared with $5.4 trillion in 2001, according to the annual survey by Watson Wyatt and leading US industry publication Pensions & Investments. Their peak was $6.2 trillion at the end of 2000, before global markets went into a tailspin.

The most striking aspect of 2002’s figures was the turbulence on the world’s currency markets, which made year-on-year comparisons for pension funds difficult because assets are stated in US dollars. The currency swings were large enough to make underlying trends among pension funds hard to decipher. The euro gained 18% against the US dollar in 2002, while the pound sterling and yen rose 11%, and the Swiss franc rose 21%. This meant that, although many large European pension funds appear from the survey to have year-on-year gains, in local currency terms they actually reported investment losses in 2002 (see Figure 1).

Figure 1: Annual growth rate by country 2001 – 2002

Note that numbers above are not adjusted for currency movements and inclusions/exclusions to the list
Source: Pensions & Investments/Watson Wyatt Global 300 Survey /p>

However, some key trends are clear enough to note, although they may be exaggerated or distorted by currency movements. In general, US pension funds recorded larger falls in assets relative to their peers in 2002, with their share of the total falling to 54% from 63% the year before.

Nevertheless, US pension assets did not drop as dramatically as might have been expected, given the relatively high equity component of the US funds compared with most of their non-US peers. This may be the result of sharply increased contributions by many large US pension funds. Public comments by many US sources suggest no wholesale moves to reduce equity exposure, though some may have occurred.

Figure 2: The world’s largest pension funds

		Ranked by US dollars.     Rank Fund Country Assets (US$ million) 1 Japan Government Pension Japan 290,991 2 ABP Netherlands 142,084 3 California Public Employees US 128,678 4 Local Government Officials Japan 101,020 5 Federal Retirement Thrift US 96,020 6 New York State Common US 95,951 7 Postal Savings Fund Taiwan 95,818 8 California State Teachers US 88,125 9 Florida State Board US 78,718 10 National Pension Corporation Korea 77,300 11 General Motors US 73,600 12 Texas Teachers US 67,095 13 New York State Teachers US 66,360 14 New York City Retirement US 65,928 15 National Public Service Japan 65,230 16 New Jersey US 57,506 17 Central Provident Fund Singapore 55,572 18 Public Schools Employees Japan 54,768 19 General Electric US 54,002 20 Employees Provident Malaysia 51,726

US fund data is from the P&I 1,000, Jan. 2003; Japan fund data, as at March 31, 2002; all other fund data, as at Dec. 31, 2002 unless otherwise noted.
Source: Pensions & Investments/Watson Wyatt Global 300 Survey

As the majority of US pension funds have tended to stick to their equity beliefs over the past few years, any change in asset allocation may simply be because they have avoided completely rebalancing their funds to their strategic benchmarks.

One newcomer to the survey is worth noting because it tops the ranking, pushing Dutch giant ABP into second place. This is Japan’s $291 billion Government Pension Investment Fund, which was formed in April 2001 when the government broke up the fund’s tightly-controlled predecessor and relaxed investment constraints. GIR