Assets at the world's largest 300 pension funds grew 14.2% last year to almost $12 trillion, according to an annual survey conducted by Pensions & Investments and Watson Wyatt Worldwide.
Gains made in world markets in 2007 were enough to offset the credit crunch that sank stock prices in the fourth quarter, helping to boost asset growth 2.7 percentage points higher than in 2006.
“Calendar year 2007 was a decent year of returns,” said Roger Urwin, global head of investment content at Watson Wyatt, Reigate, England. “It's a combination of decent markets ... and a bit of a currency contribution from the weakening (U.S.) dollar.”
In fact, the declining dollar added at least 10 percentage points to the average annual growth rates by funds in Australia, Canada and Sweden since 2002, according to data from Watson Wyatt. However, the U.S. share of assets in the top 300 held steady at 43% of 2007's $11.93 trillion total. (Data for U.S. funds are as of Sept. 30, 2007; Australian funds, June 30, 2007; Japan as of March 31, 2008; and Dec. 31, 2007, for other funds.)
But the growth in assets wasn't caused entirely by investment returns. “A certain amount of this is aggregation, rather than returns,” said Carl Hess, the New York-based global head of investment consulting at Watson Wyatt. For example, AT&T Inc. jumped in rank to 17th in 2007 from 31st after absorbing the $25 billion BellSouth Corp. plan's assets. In another example, underperforming local plans in Massachusetts were forced to transfer management of their plan assets to the $52.7 billion Massachusetts Pension Reserves Investment Management Board, Boston.
“There's a certain amount of the big getting bigger,” Mr. Hess said.
The biggest of them all again was the Government Pension Investment Fund, Tokyo. It has held the top spot since 2003's survey. With $1.07 trillion in assets, the giant fund controlled almost 9% of the total assets. However, Japan's share of the top 300 assets continued to dwindle, dropping to 14.1% from nearly 15% in 2006 and almost 18% in 2005.
Like the GPIF, the next five funds all held their rankings from the year-earlier survey. Norway's Government Pension Fund, Oslo, again claimed second with $371 billion, while Stichting Pensioenfonds ABP, Heerlen, Netherlands, ranked third with $315 billion.
The largest pension fund in the U.S. — the California Public Employees Retirement System, Sacramento — held on to fourth place with $254.6 billion, followed by Korea's National Pension Corp., Seoul, at fifth with $232 billion.
The U.S. Federal Retirement Thrift Investment Board, Washington, the top defined contribution plan in the survey, stayed in sixth with $223.3 billion.
The number of sovereign pension funds, such as the Japanese and Norwegian funds, in the survey grew slightly to 26, holding $2.8 trillion or 24% of total assets, up from 24 funds holding $2.4 trillion, or 23%, of the year-earlier total assets.