September 19, 2005 01:00 AM

WORLD'S LARGEST FUNDS:Wide world of assets

Top 300 funds enjoy 27% gain in 2004, buoyed by strong market performance

Jenna Gottlieb

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Data from the P&I/Watson Wyatt World 300 report:

The largest pension funds

Where's the wealth?

The big players

Total assets of the world's 300 largest pension funds soared 27% in 2004, according to the annual survey conducted by Pensions & Investments and Watson Wyatt Worldwide.

Assets of the P&I/Watson Wyatt 300 totaled $8.39 trillion, up from $6.59 trillion in 2003. Assets of the largest 100 funds totaled $6.13 trillion, up 31% from the year-earlier $4.69 trillion.

A huge gain — 50% — was seen with the top 20 funds, at $3.24 trillion in 2004 from $2.16 trillion a year earlier. All told, 39% of the top 300 assets were held by the top 20 pension funds in the survey at the end of last year.

Roger Urwin, global head of investment consulting at Watson Wyatt in Reigate, England, said the overall growth among the 300 could be attributed to strong market performance in 2004, the increase in Japanese assets reported and currency translation.

Howard Crane, practice director-Americas at Watson Wyatt in Denver, was not surprised by the overall increase. "Market returns in '04 were reasonably strong and accounted for part of the growth. Then there was substantial contributions made by large (U.S.) funds."

The assets of U.S. funds in the top 300 totaled $3.74 trillion in 2004, up from $3.47 trillion. But the percentage of total assets held by U.S. funds among the 300 continued to decline. In 2004, U.S. funds accounted for 44.7% of the total assets of the world's top 300 funds, the first time since the survey was first published in 1991 total U.S. assets fell below the 50% mark. U.S. funds held 52.6% of the assets in 2003, 63% in 2001 and about 59% in 1991. Mr. Urwin said the U.S. market share is shrinking because none of the growth factors applied to U.S. funds.

Still at top

Japan's Government Pension Investment Fund, Tokyo, which was created in 2001, remained at the top of the list with $1.058 trillion, the only pension fund to top the $1 trillion mark. Stichting Pensioenfonds ABP, Heerlen, Netherlands, remained in second place with $230.7 billion. The California Public Employees' Retirement System, Sacramento, remains the third largest fund in the world and the largest in the United States at $168.3 billion. (The figures used for the U.S. funds are as of Sept. 30, 2004; all of Japan's funds were estimates as of March 31, 2005, and all others are from Dec. 31, 2004.)

The Local Government Officials Pension Fund, Tokyo, moved up two notches to fourth place with $164.1 billion, and the Federal Retirement Thrift Investment Board, Washington, dropped a spot to fifth place with $141 billion. Korea's National Pension, Seoul, moved up two spots to sixth place with $134.9 billion and the New York State Common Retirement Fund, Albany, moved to seventh place with $117.5 billion, after finishing fifth in 2003.

Mr. Urwin said most plans stayed the course on their investments: "Not much changed in asset allocation terms. We still had a situation where there was an even split in equities and bonds, with continued interest in alternative assets. It is a continuation of previous trends."

Regarding asset allocation strategies in the U.S., Mr. Crane said changes were relatively modest in 2004. Most plans continued to have an average of 65% of total assets allocated to equity. "Some plans are beginning to look at alternative strategies like portable alpha and hedging strategies," Mr. Crane said, adding some plans also are paying closer attention to integrating assets and liabilities. On a country-by-country basis, the U.S. and Japan retained the first and second place rankings.

Japan estimates

While several nations showed strong assets gains, none were as significant as Japan, whose numbers were estimated by Watson Wyatt. The Government Pension Investment Fund saw a 153% increase from 2003. Overall, Japan had 21% of assets with 19 funds, up from 13.5% last year. Japan's Pension Fund Association also grew 147%, with $116.7 billion.

Mr. Urwin said Japan's largest fund experienced a significant growth in assets because many pension plans are passing assets to the government under a 2003 rule known as "daiko henjo". "Japanese funds were given the opportunity to shift assets to the government to reduce their liability," he noted.

In the United States, some notable corporate pension funds held steady or declined in the rankings. Detroit-based General Motors Corp.'s pension plan retained 11th place with $107 billion, up from $89.7 billion in 2003. General Electric Co. Stamford, Conn., dropped to 24th place from 17th, despite an increase in assets to $66.4 billion, from $61.6 billion in 2003. Verizon Communications Corp., New York, fell to 35th place with $51.8 billion, from 25th place with $54.5 billion in 2003.

The United Kingdom, with 34 funds, ranked third overall among countries with $626 billion; an 18% increase from 2003's total of $532.4 billion. BT Group PLC, London, the highest-ranked U.K. fund, came in at 32nd with $57 billion, up from $46.7 billion in 2003.

The Netherlands ranked fourth in terms of overall pension assets among firms in the top 300, with $493 billion in 2004, up 17% from $419 billion. The two largest Dutch funds — ABP and Rotterdam-based PGGM, Rotterdam, each grew more than 20%. But PGGM, at $81.5 billion, fell in the cumulative rankings two spots to rank 17th.

Canada, which ranked fifth, saw its pension fund assets in the top 300 grow 21% to a combined $397 billion. Ontario Teachers Pension Plan Board, Toronto, ranked 20th with $67.8 billion, up from $57.5 billion in 2003; the Canada Pension Plan, Toronto reported $66.7 billion and ranked 22nd up from $53.9 billion.

Elsewhere, South Africa's Government Employees Pension Fund, Johannesburg, grew 89% to move it to 15th with $86.8 billion in 2004, up from 35th place with $45.7 billion in 2003.