APAC’s top pensions’ assets rise, global registers 12.9% dip

The region accounts for 26.4% of the total assets in the world’s 300 largest pension funds.

The world's largest 300 pension funds have experienced a decline in assets for the first time since 2018. This decrease is comparable to the drop seen in 2008, occurring at a pace observed only twice in the twenty-year history of the annual study conducted by the Thinking Ahead Institute, in collaboration with Pensions & Investments, WTW reported.

Regionally, Asia-Pacific (APAC) accounted for 26.4% of assets in the world's 300 largest pension funds, increasing from 25.5% in 2021. North America's share remained stable at 45.6%, while Europe's share decreased to 24.1% in 2022.

Over the past two decades, APAC has experienced the fastest growth in asset share, surpassing Europe for second place. North America's share of assets in the top 300 pension funds decreased from 58% in 2002 to 46% in 2022.

The assets of the top 20 pension funds decreased by 11.8% in the last year, with APAC's share growing to 43.1%. 

The Government Pension Investment Fund of Japan (GPIF) remained the largest pension fund, with $1.4 trillion in assets, while the Employees’ Provident Fund of India entered the top 20 funds for 2022.

By the end of 2022, the combined assets of these top 300 pension funds had decreased by 12.9%, totalling $20.6t compared to $23.6T at the end of 2021. 

This represents a significant reversal from the 8.9% increase in assets seen in the previous year. The recent drop is also faster than the 12.6% annual fall observed in 2008 during the global financial crisis, which had been the fastest annual decline recorded in the study's 20-year history.

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Notably, the UK and Japan had the highest number of pension funds dropping out of the top 300 globally. Factors contributing to this decline include the UK gilts crisis of September 2022 and the ongoing shift from defined benefit (DB) pensions to smaller defined contribution (DC) plans.

In 2022, sovereign and public sector pension funds accounted for 152 of the top 300 funds, representing 70.9% of total assets. 

Sovereign pension funds held $6.2t in assets, while sovereign wealth funds (SWFs) totalled $11.6t. SWFs saw a 13.9% increase in assets during 2022, compared to a 10.6% decrease for sovereign pension funds.

The study notes that while market performance has improved from 2022 to 2023, caution remains crucial due to rapidly changing conditions and the influence of technological advancements and artificial intelligence in the asset management industry.

Balancing sustainability efforts is also a key challenge, with pension funds needing to find the right balance between ambitious commitments and fund legitimacy.