Global pension funds saw relatively strong growth in 2021, recall the end of 2021 many stock markets hit all-time highs and the bond market had not been routed yet. The world’s 100 biggest pension funds were worth over $17 trillion in total, an increase of 8.5% over 2020. A study from the Thinking Ahead Institute and Pensions & Investments released in September 2022 gives us a look into who are the largest pension funds around the world. The top 20 pension funds make up 41.0% of total AUM in 2021, down from 41.8% in 2020. Of those top 20 funds they invested approximately 53.5% of their assets in equities, 27.9% in fixed income securities and 18.6% in alternatives and cash.
While much has happened in 2022 with dramatic shifts in commodities, bonds and stock prices, the majority of the funds invest with similar strategies. This should not affect their ranking significantly. The obvious difference will be funds that have invested in geopolitical hotspots or in assets like cryptocurrencies.
Pension funds should be about consistency and Japan’s Government Pension Investment Fund (GPIF) has that down. GPIF is the largest ranking pension fund globally for the 21st year in a row. Until recently the fund was the largest holder of domestic stocks in Japan, that is before the Bank of Japan started buying stocks and ETFs with Quantitative easing.
The Government Pension Fund of Norway is ranked second with an AUM of US$1.4 trillion. It is around 20% smaller than GPIF. Norway is known also for its Sovereign wealth fund, colloquially known as Norway’s oil fund
Funds off this size get attention. The GPIF fund made headlines in Japan when it began investing in startups, this has been the domain of risk chasers like Softbank. What that does is signal to some investors other pensions may make similar investments. To others, of the contrarian nature it may signal a market top, which actually happened in dramatic fashion.
We will read more on leadership later after the massive collapse and fraud of FTX in November 2022. BlackRock and the Ontario Teachers’ Pension Plan Board were both been hit by the collapse of FTX. Other investors included Temasek, Sequoia Capital, and Tiger Global. It can be argued smaller investors would not have followed had the so-called wise investors hadn’t investments so heavily, if at all.
A total of 37 new funds has entered the top 300 over the last five years. The US accounts for 148 funds in the top 300, 47 funds are in the top 100 largest pension funds. Included are the largest public sector fund: the Thrift Savings Plan (TSP), which are overseen by the Federal Retirement Thrift Investment Board.
The top 300 list has experienced significant movements in the period 2016-2021 with 28 newcomers and 14 funds leaving the ranking on a net basis, the US has had more funds entering the ranking during the period (14 funds), while Japan experienced the highest net loss (5 funds)
In the US, which has become more partisan than ever Democrats have pushed to divest assets in fossil fuel companies, while Republicans have proposed blocking investment in Chinese-owned companies. Interestingly George Soros was the largest donor to the Democrats in the last election, with FTX’s founder the second largest. You will also see large donors for the Republican side. What is clear money controls politics and politicians seeking favor. Investors will be watching how dirty and entwined all this gets and you will see partisan types follow their politics in making a decision, never considered a wise move to become emotional about investing.
Top Global 100 pension funds, ranked by Total Assets
- Government Pension Investment Fund 🇯🇵 Japan $1.7T
- Government Pension Fund 🇳🇴 Norway $1.4T
- National Pension 🇰🇷 South Korea $798.0B
- Federal Retirement Thrift 🇺🇸 U.S. $774.2B
- ABP 🇳🇱 Netherlands $630.4B
- California Public Employees 🇺🇸 U.S. $496.8B
- Canada Pension 🇨🇦 Canada $426.7B
- National Social Security 🇨🇳 China $406.8B
- Central Provident Fund 🇸🇬 Singapore $375.0B
- PFZW 🇳🇱 Netherlands $315.5B
- California State Teachers 🇺🇸 U.S. $313.9B
- New York State Common 🇺🇸 U.S. $267.8B
- New York City Retirement 🇺🇸 U.S. $266.7B
- Local Government Officials 🇯🇵 Japan $248.6B
- Employees Provident Fund 🇲🇾 Malaysia $242.6B
- Florida State Board 🇺🇸 U.S. $213.8B
- Texas Teachers 🇺🇸 U.S. $196.7B
- Ontario Teachers 🇨🇦 Canada $191.1B
- National Wealth Fund 🇷🇺 Russia $180.7B
- AustralianSuper 🇦🇺 Australia $169.1B
- Labor Pension Fund 🇹🇼 Taiwan $168.9B
- Washington State Board 🇺🇸 U.S. $161.5B
- Public Institute for Social Security 🇰🇼 Kuwait $160.0B
- ATP 🇩🇰 Denmark $155.4B
- Wisconsin Investment Board 🇺🇸 U.S. $147.9B
- Future Fund 🇦🇺 Australia $147.9B
- Boeing 🇺🇸 U.S. $147.2B
- Employees’ Provident 🇮🇳 India $145.0B
- New York State Teachers 🇺🇸 U.S. $144.4B
- North Carolina 🇺🇸 U.S. $137.1B
- Alecta 🇸🇪 Sweden $136.7B
- GEPF 🇿🇦 South Africa $129.1B
- California University 🇺🇸 U.S. $125.3B
- Bayerische Versorgungskammer 🇩🇪 Germany $122.0B
- Ohio Public Employees 🇺🇸 U.S. $121.6B
- AT&T 🇺🇸 U.S. $119.5B
- Public Service Pension Plan 🇨🇦 Canada $117.9B
- National Federation of Mutual Aid 🇯🇵 Japan $117.1B
- Metaal/tech. Bedrijven 🇳🇱 Netherlands $115.8B
- IBM 🇺🇸 U.S. $115.4B
- Universities Superannuation 🇬🇧 UK $111.2B
- Virginia Retirement 🇺🇸 U.S. $110.0B
- Pension Fund Association 🇯🇵 Japan $109.8B
- Raytheon Technologies 🇺🇸 U.S. $108.9B
- Michigan Retirement 🇺🇸 U.S. $108.0B
- Aware Super 🇦🇺 Australia $107.5B
- New Jersey 🇺🇸 U.S. $104.5B
- Minnesota State Board 🇺🇸 U.S. $102.9B
- PFA Pension 🇩🇰 Denmark $102.7B
- Kaiser 🇺🇸 U.S. $101.0B
Pension Funds explained
A pension fund is a fund that looks to the long term with the goal and rationale to provide retirement income. There are essentially four different types, but over time there have become hybrid variations. Among the largest funds, public sector funds are the most common.
- Sovereign funds: Funds controlled directly by the state and established by national authorities.
- Public sector funds: Funds that cover public sector workers, such as government employees and teachers, in provincial or state sponsored plans. Teachers’ funds are among the largest in the US.
- Private independent funds: Funds controlled by private sector organizations that are authorized to manage pension plans from different employers.
- Corporate funds: Funds that cover workers in company sponsored pension plans, popular especially when companies match stock investments
Source: Thinking Ahead Institute
From The TradersCommunity Research Desk