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Apac pension funds outpace global average

Pension funds in Asia-Pacific grew faster than the global average in 2016, while still lagging behind in long-term growth, according to a report from Willis Towers Watson.

 

Six Asia-based pension funds are among the world’s top 20 by size, according to the report. Their total assets under management were $3.7trn at the end of 2016, a 7% increase from the year before.

The growth rate of the six Asia pension funds outpaced the average of the top 20, which was 6.1%.

Japan’s Government Pension Investment Fund remains the largest pension fund in the world, with $1.24trn in assets, followed by Norway’s Government Pension Fund, $893bn.

Asia-Pacific largest pension funds

Pension Fund Country AUM
Government Pension Investment Fund Japan $1.24trn
National Pension Service South Korea $462bn
National Social Security Fund China $349bn
Central Provident Fund Singapore $227bn
Pension Fund for Local Government Officials Japan $183bn
Employees Provident Fund Malaysia $165bn
Data: Willis Tower Watson 

The report analysed the world’s 300 largest pension funds, which together hold $15.7trn in assets out of $36.4trn, which is the total of all pension fund assets.

Globally, defined benefit plans still dominate the share of pension fund assets. They accounted for 67% of total pension assets in Asia-Pacific, 76% in North America and 53% in Europe. (Governments’ reserve funds, which guarantee pension benefits, make up a significant 32% in Europe, and a much smaller share in other regions).

Yet in the context of global assets, pension fund assets only accounted for around 19% in 2015, according to a June 2017 report by PWC. 

High net worth and mass affluent individuals held 64% of the total, with insurance companies and sovereign wealth funds making up 13% and 3%, respectively.

Conservative approach

In 2016, among the top 20 funds, China’s pension plan saw the largest growth rate of AUM, 22.8%, as measured in local currency, followed by Norway’s with 17.5% growth.

Among the top 20 funds, Asia Pacific funds stand out for the most conservative approach to asset allocation. They invested, on average, 54% of their assets in bonds and 39% in equities. Those in North America allocated 47% to equities and those in in Europe 48% to equities.

Over the past five years, pension funds in Asia-Pacific grew more slowly (2.8% annualised) than their counterparts in Europe (3.1%) and North America (6.7%).

Part of the Mark Allen Group.