You might not think so, but big pension funds are among the world’s biggest movers and shakers when it comes to owning assets.
That’s according to a new report from Willis Towers Watson’s Thinking Ahead Institute, which points out that the Asset Owner 100—the world’s 100 biggest asset owners—account for around $19 trillion, or nearly 35 percent, of capital held by all asset owners globally, about $55 trillion in assets altogether.
Says the report, “These institutional investors warrant particular attention because they have the discretion to place their capital into any country and any asset class that suits them. It follows that their policies and their decisions regarding asset allocation and stewardship shape capital markets and are a key element in the smooth functioning of the global economy.”
Out of the three basic types of organization that make up the AO100 are what the report terms
- the older generation (pension funds, endowments and foundations)
- the younger generation (sovereign wealth funds)
- and the newcomers (outsourced CIO organizations and master trusts).
These three groups—asset owners—have five basic qualifying characteristics, and pension funds are the single biggest group of asset owners that meet all five:
1. Working directly for a defined group of beneficiaries/savers/investors as the manager of their assets in a fiduciary capacity under delegated responsibility.
2. Working with a sponsoring entity, usually a government, part of government, a company or a not-for-profit.
3. Working within explicit law and possessing an implicit societal license to operate because of its societal trust and legitimacy.
4. Delivering mission-specific outcomes to beneficiaries and stakeholders in the form of various payments or benefits into the future.
%. Employing a business model that combines a governance budget (essentially resources and processes) and a risk budget (reflecting the mix of financial assets that delivers on the mission).
Not only are pension funds holders one of “the most influential capital on the planet,” but they account for 60.8 percent of fund assets held by the AO100, as well as 67 percent of the number of funds.
Of the top 20 funds, the report adds, 50 percent are pension funds, and the average assets of pension funds accounted for $170 billion, just below the average of $187 billion for all funds.