U.S. pensions among the world’s largest funds

U.S. pension funds command the greatest share of assets of the world’s 300 largest funds, according to the latest research from Willis Towers Watson’s Thinking Ahead Institute.

More than one-third (36.7%) of the $18.1 trillion invested globally in pensions are in 133 U.S. funds, including the $531 billion Federal Retirement Thrift fund for U.S. civil service employees and retirees, the world’s fourth largest pension fund.

Five non-public sector funds are among the top 50: Boeing with $122 billion; AT&T with $114 billion; IBM with $104 billion; General Motors with $96 billion; and General Electric with $79 billion.

That five private sector employers made the top 50 is impressive given that only 17% of the total $18.1 trillion is invested in company-sponsored pension plans. The bulk of the money (68.6%) is held in sovereign and public sector pension funds, according to the research.

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The report reflects the ongoing shift to defined contribution benefit plans from traditional “defined benefit” pensions. Assets in defined benefit plans climbed 13.5% in 2017, while those in defined contribution plans surged a more robust 17.6%.

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Despite their slower growth rate, old-fashioned pension plans still dwarf the relative newcomers. Traditional pension plans account for 64.7% of the $18.1 trillion in the top 300 plans globally, with defined contribution plans making up only 22.7%.

“While the longer-term shift from DB to DC is widely understood and remains unchanged, it is striking that DB assets continue to grow and form the majority of the total assets,” says Roger Urwin, global head of investment content at Willis Towers Watson.

Meanwhile, assets in hybrid plans — those that incorporate both DB and DC components — grew 15.1% in 2017. They make up just .8% of total assets.

“We see the hybrid market as an interesting area of the landscape to watch, with its growth expected to continue as asset owners shift away from traditional DB strategies,” Urwin says.

The U.S. is notable not only for having the greatest number of funds of any country, it also leads the world in adding the most funds to the top 300 list over the last five years. From 2012 to 2017, the country added 18 U.S. funds but saw nine fall off the list. The nine that left are Alcatel-Lucent, DuPont, United Methodist Church, Dow Chemical, ConocoPhillips, Kraft Foods, Eastman Kodak, Seimens USA and Alcoa.

Overall, assets at the world’s 300 largest pension funds jumped 15.1% in 2017, a significant increase from the 6.1% growth achieved in 2016, according to the research.

North American funds held the greatest share of assets, accounting for a 42.3% share, followed by Asia Pacific (27.3%) and Europe (26.5%). They also posted the fastest annualized growth, rising 6.2% from 2012 to 2017. Asia Pacific and European funds, in contrast, grew 6.1% and 3.8%, respectively.

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