Emerging Markets Send Pension Assets Surging

Assets under management at the world’s top 300 pension funds jumped by 15.1 percent in 2017, to more than $18.1 trillion, driven largely by the growth of pension funds in emerging markets, a new report from Willis Towers Watson shows. 

The annual report, published Tuesday by the consulting firm’s Thinking Ahead Institute, ranks the top pension funds in the world based on assets under management. Last year's growth rate, also helped by strong returns in all major asset classes, substantially outpaces the 6.1 percent increase reported in 2016, when the top 300 pensions managed $15.7 trillion, the firm said.

“This year was notable for the pace of growth,” Bob Collie, head of research for Willis Towers Watson’s Thinking Ahead Group said by phone. “The increase in assets was huge. That’s not just asset growth and it’s not just currency. It’s that these emerging economies are growing.”

Perhaps the biggest indicator of the role emerging markets played in the overall growth of pension assets is the entry of India’s Employees’ Provident pension fund into the top 20 funds ranked, Collie said. 

What’s more is that the total proportion of assets represented by the Asia Pacific region overtook the proportion of assets represented by Europe during 2017 within the 300 funds, Collie noted.

“The increased number of the largest funds originating from emerging market regions is reflective of a longer-term trend, with a great deal of progress being made in terms of governance structures and resiliency,” said Roger Urwin, global head of investment content at Willis Towers Watson, in a statement. 

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This year, Japan’s Government Pension Investment fund held its 2016 ranking, placing first with $1.44 trillion in assets under management. Norway’s Government Pension Fund ranked second once again.

But the entry of India’s Employees’ Provident pension fund, as well as a higher ranking of Malaysia’s Employees Provident Fund, and the fall of Denmark’s ATP in this year’s list signaled those shifts Urwin and Collie mentioned. Malaysia’s pension fund moved from No. 15 in 2016 to No. 14 in 2017. Meanwhile, ATP fell from No. 20 to No. 21. 

“This is is something where the economic influence as a group is growing,” Collie said. “And when you look for example at those top 20 funds, a lot of them are pretty young...You’re seeing some rapid growth in those emerging markets.”

With that rapid growth, according to Collie, comes a rapid increase in responsibility for governments in emerging markets. 

“There is so much political interest in these funds,” Collie noted. “They think long and hard about their governance goals for the organizations.”