(Pictured: Martin Goss)
World rankings of institutional funds probably don’t mean much to the underlying investors and fund members but the data collection often exposes some interesting trends around the global pensions industry. Towers Watson’s annual Top 300 Funds report was released last week.
In the latest Top 300, compiled by Towers Watson and ‘Pensions & Investments’, Australia produced a newcomer to the list – HostPlus, ranked at 290. This took the Australian new entrants to three over the past five years, which is more than any other single country.
However, because the data is collected in US dollars, most of the other 15 Australian funds in the world’s top 300 slipped down the rankings for this year. The Aussie dollar depreciated by 14 per cent against the greenback last year.
But the research also showed the continuing decline of defined benefit (DB) funds versus defined contribution (DC) funds. Australia has the highest proportion of DC funds in the world. DB funds have declined from 75 per cent of the top 300’s assets to 67 per cent over the past five years. The assets of DB funds were up 3 per cent last years compared with 9 per cent for DC funds.
Total assets of the 300 funds increased by 6 per cent to US$15 trillion between 2012 and 2013, with the 27 sovereign wealth funds surveyed accounting for 28 per cent of assets.
Martin Goss, senior investment consultant for Towers Watson in Australia, said last week: “Quantitative easing (QE) and easy monetary conditions have provided an unexpected tailwind for equity markets for the last five years or so, which continued strongly in 2013. This clearly helped many funds given their high allocation to equities. Despite ongoing high performance from equities, many funds, particularly more mature funds, continue to diversify into other asset classes as they de-risk their portfolios. There is also broad acknowledgement that QE and low interest rates will not last forever and that recent exceptional equity market growth is unlikely to repeat in 2015.”
He said: “The continuing growth of most pension markets is genuinely encouraging; despite the fact that many structural issues remain. During 2013 we dared to believe that a number of positive developments presaged the end of the global financial crisis and as it turned out the global economic recovery has continued to gain momentum into 2014. It is noteworthy that the 13 major pensions markets are now more than double the size they were ten years ago and pension assets now amount to around 78 per cent of global GDP, substantially higher than the 61 per cent recorded in 2008.”