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Worlds top 300 pension funds hit $12 trln-study

Date: Tuesday, September 2, 2008
Author: Cecilia Valente, Thomson Reuters

Despite adverse market conditions, contributions from sponsors have helped large pension schemes to grow.

LONDON (Thomson IM) - The total assets of the world's largest 300 pension funds grew by over 14 percent in 2007 to around $12 trillion in spite of the difficult market conditions, according to a study published on Tuesday.

The research by consultancy Watson Wyatt and United States-based publication Pensions & Investments found that assets grew by around $1.5 trillion from the previous year's figure.

It also said the size of this asset pool has more than doubled in a five-year period.

Carl Hess, global head of investment consulting at Watson Wyatt, said many large pension funds have received higher contributions from their sponsors - mainly governments - helping them to grow despite adverse market conditions in the latter part of last year.

'These persistent extreme investment conditions have also increased scrutiny on risk management as funds contemplate a new framing of risk in light of the continuing financial crisis and the robustness of their own governance arrangements,' Hess said.

The survey said the U.S. remains the country with the largest market share of pension funds assets accounting for 43 percent, although its share has been eroded from 54 percent in 2002 partly due to the weak dollar.

Japan has the second largest market share on 14 percent, 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 over $1 trillion.

The UK, Netherlands and Canada are third with a market share of 6 percent each, although it was Norway's Government Pension fund to win the second place among the largest pension funds after Japan's Government Pension Investment and Korea's National Pension.

Swedish and Dutch funds grew at 19 percent and 18 percent respectively, in U.S. dollar terms.

Sovereign funds have grown at 24 percent during the past five years. In 2007 these funds constituted 23 percent of assets and total $2.8 trillion, up by $4 billion from the previous year.

In terms of asset size, North American and European funds have grown steadily in the past five years, at compound annual growth rates of 13 percent and 21 percent respectively.

Asia funds in Asia-Pacific in contrast showed growth for the first time in three years. Assets in Australia have grown at the fastest rate over a five year period - 27 percent in U.S. dollars terms and 17 percent in local currency terms

In 2007, the top 20 funds grew at a slower rate than the remaining funds, for the second time since 2002, but during the past five years the top 20 funds have grown at 19 percent compared to 17 percent for the remaining funds.

These top 20 funds amount to $4.4 trillion, constituting over 15 percent of global pension assets, with each fund holding more than $100 billion.

Hess said: 'Large pension funds, notably the top sovereign funds, will continue to grow and be successful if they remain adaptable and prioritise excellent governance and risk management.'

By Cecilia Valente: +44 (0) 20 7422 4925; cecilia.valente@thomsonreuters.com