Pension funds have lost market share among 100 largest asset owners with $23T AUM

The 100 largest asset owners in the world saw their assets under management decline by 9% by the end of 2022 compared to the previous year, but still controlled more than $23 trillion in assets. But who are they?

Five years ago, pension funds were in pole position, holding 60% of AUM among the top 100 owners at the time. But relative investment performance – with a slower correction in their collective assets – and new inflows means sovereign wealth funds have surged ahead.

While sovereign wealth funds owned 32% of the top 100’s assets five years ago, they now control 39%, or $9.1 trillion in absolute terms, according to new research by the Thinking Ahead Institute. Pension funds remain the largest group overall, with 53% of assets while outsourced CIOs and master trusts are responsible for the remaining 8% of total AUM.

“Asset owners from sovereign wealth funds to pension funds have navigated a year when volatility and uncertainty in the global economy have been at their highest in a generation – with often divergent outcomes,” said Jessica Gao, director at the Thinking Ahead Institute. “The disruption caused by elevated inflation and increased interest rates has affected equity and bond markets on a global scale, putting extra pressure on asset owners to reassess and adjust their strategies. The shift from an era of low inflation and interest rates has given a rise to a new macroeconomic landscape that demands a fresh understanding and management approach. This is impacting different types of asset owner in different and unexpected ways.”

RISK METHODOLOGIES

Gao added that this has seen new risk methodologies emerge, such as a total portfolio approach, with goals the central driving force and the best ideas incorporated through competition for capital at the total portfolio level.

“That has also allowed some large asset owners to ride escalating market waves with better short and medium-term outcomes too. Meanwhile, we’ve also noticed a renewed emphasis on positive culture, when markets put asset owners and their teams under pressure,” she said.

The three largest asset owners globally are:

• Government Pension Investment Fund of Japan - $1.4 trillion AUM
• Norway’s Norges Bank Investment Management - $1.3 trillion AUM
• China Investment Corp. – $1.1 trillion AUM

North America remains the largest region by asset share with 33.9%, but Asia Pacific is close behind at 33.7% and EMEA is at 32.4% of total AUM.

Among the largest global asset owners, artificial intelligence is becoming more important for the investment and decision-making process.

“Globally significant asset owners are showing greater awareness and planning for globally significant trends. This has ranged, just in the last twelve months, from equally-existential questions of systemic risk – from climate to geopolitics and technology. Such a breadth of threats and opportunities will require a delicate juggling act as investment organisations strive to balance their own internal investments,” Gao concluded.