Press Releases

UK, September 5, 2007 - Total assets at the world’s largest 300 pension funds grew by around 12% to US$10.4 trillion during 2006, adding US$1 trillion to the previous year’s figure for the second year in a row, according to Pensions & Investments and Watson Wyatt research. The P&I / Watson Wyatt global 300 ranking, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, shows that increases in assets occurred in most major countries and that the size of this pool of assets has almost doubled in a five-year period.

Roger Urwin, global head of investment consulting at Watson Wyatt, said: “Pension funds remain very high on the government and corporate agenda right across the world. Their wider societal influence is increasing its profile too. It is clear that over the past five years more time and attention has been allocated to these large funds. Contributions to these funds have continued to increase as have benefit payments in line with their greater maturity. We have also seen risk being scrutinised more closely. Recent extreme investment conditions will have reminded these long-term investors of the need to understand risks better as a first step to employing effective asset-liability management.”

According to the survey, the US remains the country with the largest market share of pension funds assets accounting for 43%, although its share has been eroded (53% in 2003) mainly because of a weak dollar and various significant developments around sovereign pension funds elsewhere. Japan has the second largest market share on 15%, largely because of the Government Pension Investment Fund of Japan which is still at the top of the ranking, a position it has held for the past five years, with assets of close to US$1 trillion. The UK has the third largest market share of 7% followed by the Netherlands on 6%. In addition, pension funds in the ‘Other - developing world’* category are growing in importance and now have a combined market share of 10% of the top 300, compared with 7% three years ago, with Korea, South Africa and Taiwan having the majority of the assets of this category.

The survey shows that assets in Australia have grown at one of the fastest rates over a three-year period; 71% p.a. in US$ terms and 68% p.a. in local currency terms. During the same period, the US funds grew at 9% p.a. while large pension funds in the ‘Other - developing world’* category grew at 32% p.a.

In 2006, the top 20 funds grew at a faster rate than the remaining funds, consistent with the longer-term trend. According to the survey, the compound annual growth rate (CAGR) for the past five years of the top 20 funds is almost 19%, while the CAGR for total global assets for the same period is around 14%†. These top 20 funds amount to US$3.8 trillion, constituting over 15% of global pension assets, with each fund except one holding more than US$ 100 billion. Major changes to the composition of the top 20 funds over the last three years include the arrival of the Government Employees Pension Fund of South Africa, a fund which rose 28 places to position 7 at the end of 2006 and Canada Pension, both from a growing breed of sovereign pension funds. Other new entrants over the past three years include the Pension Fund Association of Japan and the New York City Retirement fund.

Roger Urwin said: “Large pension funds will continue to grow their influence on the global economy. For these funds, building best practice governance and risk management capabilities continue to be the top agenda items.”

A notable sub-group of the top 300 is the sovereign pension funds which are controlled by various nation states. Using the widest definition to describe these funds, they now amount to US$2.4 trillion, up 35% p.a. over the past three years.

Roger Urwin said: “These sovereign funds, which have been set up generally with very long time horizons to mitigate the demographic crunch ahead, have a fascinating range of issues to wrestle with. On top of tackling the ever more stretching risk, return and time horizon equation, they have to look increasingly carefully at non-financial factors. In particular, these funds have to take very seriously questions of sustainability related to environment, social factors and corporate governance. We should be increasingly interested in their actions and leadership as these subjects are of critical macro-economic and societal significance. We should expect a period in which the world’s biggest funds, and the sovereign funds in particular, are rarely out of the news.”

Statistics from the Pensions & Investments/Watson Wyatt Global 300 survey.
Market share (%)

 

Rank	Country	2006	2003
1.	US	42.9	52.6
2.	Japan	14.8	13.5
3.	UK	7.1	8.1
4.	Netherlands	6.1	6.4
5.	Canada	5.5	5.0
	Other - Developed world**	13.8	7.8
	Other - Developed world*	9.7	6.8

Top 20 pension funds

Rank	Fund	Country	Total assets $bn
1.	Government Pension Investment	Japan	$935.569
2.	Government Pension	Norway	$285.625
3.	ABP	Netherlands	$273.904
4.	California Public Employees	U.S.	$218.214
5.	National Pension	Korea	$203.232
6.	Federal Retirement Thrift	U.S.	$188.086
7.	Government Employees	South Africa	$177.559
8.	California State Teachers	U.S.	$149.008
9.	New York State Common	U.S.	$144.289
10.	Local Government Officials	Japan	$136.845
11.	Postal Savings Fund	Taiwan	$128.194
12.	Florida State Board	U.S.	$124.450
13.	Ontario Teachers	Canada	$120.981
14.	General Motors	U.S.	$118.992
15.	New York City Retirement	U.S.	$114.598
16.	Pension Fund Association	Japan	$106.767
17.	PGGM	Netherlands	$106.526
18.	Canada Pension	Canada	$100.738
19.	Texas Teachers	U.S.	$100.717
20.	New York State Teachers	U.S.	$94.347

Ranked by U.S. dollars, in billions. U.S. fund data are from the P&I 1,000; Japan fund data as of March 31; Australia fund data as of June 30, 2006; Taiwan fund data as of April 30; all other fund data as of Dec. 31, unless otherwise noted. Source: Pensions & Investments/Watson Wyatt Global 300 survey.

For the full P&I / Watson Wyatt global 300 research, please click here (PDF - 204 KB)

For further information please contact:
Paul Deane-Williams
Head of Public Relations - Investment
Watson Wyatt Limited
+44 (0)1737 274397
paul.deane-williams@watsonwyatt.com

Gay Collins
Penrose Financial
+44 (0)207 786 4882
gayc@penrose.co.uk

About Watson Wyatt Investment Consulting
Watson Wyatt Investment Consulting, a division of Watson Wyatt, is focused on creating financial value for institutional investors through independent, best-in-class investment advice. We are specialist investment professionals who provide co-ordinated investment strategy advice based on expertise in risk assessment, strategic asset allocation, and investment manager selection. Watson Wyatt Investment Consulting provides investment advice to some of the world’s largest pension funds and institutional investors, and has more than 410 associates in Europe, the Americas and Asia.

In the US investment advisory and investment consulting services are provided by Watson Wyatt Investment Consulting, Inc., which is a subsidiary of Watson Wyatt Worldwide Inc. Watson Wyatt Investment Consulting, Inc., is a registered investment adviser with the Securities and Exchange Commission.

Watson Wyatt (NYSE: WW) is a leading global human capital and financial management consulting firm. The firm specialises in employee benefits, investment consulting, human capital strategies, technology solutions, and insurance and financial services and has 6,700 associates in 31 countries. The firm is located on the Web at www.watsonwyatt.com.

* The ‘Other – Developing world’ category includes the following 12 countries: Korea, South Africa, Taiwan, Malaysia, Chile, Brazil, Mexico, Kuwait, China, India, Thailand and Botswana.
** The ‘Other – Developed world’ category includes the following 15 countries: Australia, Norway, Sweden, Denmark, Switzerland, Germany, Finland, Singapore, Spain, France, Ireland, Belgium, Italy, New Zealand and Portugal.
† Global Pension Asset Study