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Global Pension Fund Assets On The Up

21 September, 2001

Watson Wyatt Press Release

GLOBAL, September 21, 2004 - Total assets at the world's largest pension funds grew by 19% to US$6.6 trillion during 2003, moving above the previous high of US$6.2 trillion reached in 2000, according to Watson Wyatt research. The P&I / Watson Wyatt global 300 ranking, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, showed that large increases in assets occurred in most major countries consistent with the general recovery in markets.

During the year, which was characterised by rising equity markets and continued US dollar weakening, it was non US-based funds with significant equity allocations that achieved the highest US-dollar growth. In addition, US funds?domination of the ranking declined again, continuing a trend of recent years, with their overall market share falling almost 2% during the year to 52.6%.

Roger Urwin, global head of investment consulting at Watson Wyatt, said: he recent strengthening of equity markets has helped repair some of the massive damage pension funds around the world experienced from 2000 to early 2003. While stronger markets provided a welcome respite there remains more guarded optimism about future equity returns and as a result funds are now more inclined to consider diversifying their assets, mainly into bonds and alternatives. However, such strategic changes have not been commonplace during the past 12 months, as funds have not wished to lock in equity losses relative to their 2000 levels.

The continuing weakness of the US dollar against most world currencies had a significant impact on the ranking. As a result non US funds appear to have been strongest, with many posting high, double-digit growth with an average of 22%. When viewed in local currency terms, however, the average of these funds falls to only 5%.

Roger Urwin said: Despite high allocations to strongly performing equity markets and increased contributions in these countries during 2003, many funds have negative growth as they continue to pay more in benefits than they receive in contributions and investment income. The pressure to narrow the gap between assets and liabilities in these countries will force funds to improve their govenance arrangements and make the most of their risk budgets. This should lead to increased diversity, better return-seeking potential and in turn reduce deficits.

Some of these factors were evident in 2003 and deficits at private plans, in general, diminished where decision makers spent more time on funding issues and sponsors increased contributions - the overall result has been an increase in average funding levels to somewhere between 80% and 90%.

Statistics from the Pensions & Investments/Watson Wyatt Global 300 survey

Top 300 funds highlights:

• South Africa had the largest percentage gain in value of assets, (in US dollar terms) of 86.1%, followed by Brazil at 79% and Canada at 52%
• The UK produced the lowest growth in value of assets (in US dollar terms) at 7%
• There was no change in the concentration of assets between fund-size segments.

Top 50 funds highlights:

• Government Pension Investment, Japan, had the single largest US-dollar gain
• Canadian funds showed the largest percentage growth
• U.S. funds had the largest total US-dollar gain, closely followed by Japan
• U.K. funds suffered the sharpest decline in both percentage and US-dollars terms
• U.S. funds lost the most market share.

Funds that gained the most in assets:

• New York City Teachers, U.S., 327.0% (partly due to a change in reporting)
• Government Employees, South Africa, 136.0%
• Bae Systems Pension Scheme, U.K., 110.7%
• Previ, Brazil, 89.3%
• Huisartsen, Netherlands, 87.2%
• Organization for Workers, Japan, 73.4%.

Top 20 pension funds
Ranked by total assets as at 31 December 2003 

Ranking	Organisation	Country	Total assets (US$ million)
1	Government Pension Investment	Japan	418,976
2	ABP	Netherlands	188,505
3	California Public Employees	U.S	148,840
4	Federal Retirement Thrift	U.S	118,815
5	New York State Common	U.S	106,843
6	Local Government Officials	Japan	105,096
7	California State Teachers	U.S	103,277
8	National Pension	Korea	100,289
9	Florida State Board	U.S	92,310
10	Postal Savings Fund	Taiwan	91,537
11	General Motors	U.S	89,738
12	Texas Teachers	U.S	77,836
13	New York State Teachers	U.S	73,481
14	National Public Service	Japan	72,623
15	PGGM	Netherlands	66,350
16	New Jersey	U.S	63,591
17	General Electric	U.S	61,622
18	Central Provident Fund	Singapore	60,770
19	Public Schools Employees	Japan	60,334
20	IBM	U.S	60,119

Source: Pensions & Investments/Watson Wyatt Global 300 survey  
For further information contact:
Paul Deane-Williams
Client Development Consultant
Watson Wyatt LLP
+44 (0)1737 274397
paul.deane-williams@eu.watsonwyatt.com

Sally Todd / Caroline Deutsch
Penrose Financial
+44 (0)207 786 4815
 

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