The Government Pension Investment Fund, Tokyo, once again held the top spot on the list with $1.43 trillion. However, unlike many retirement funds in emerging markets that have a lower percentage of members in retirement, Japanese funds overall declined 6.1% in local currency terms in the five years ended Dec. 31 as they became cash-negative, paying out more than they took in.
Similarly, assets in defined contribution plans rose 12.5% in 2010 vs. 7.6% for defined benefit plans. “Part of that is relative maturity — most of these (DC) funds are not as mature as DB schemes, so they aren't paying out as much in benefits,” Mr. Hess said, adding that DC plans tend to be stocked with more equities than DB plans and therefore outperform in years with stronger equity growth. The MSCI All-Country World index rose 12.1% in 2010.
Five of the top 20 funds expressed some concern about longer life expectancies and the upcoming retirement of baby boomers as potentially destabilizing forces for their plans. “Time is beginning to press, because the economic and demographic factors that demand changes to our pension system will not wait,” Hans Alders, chairman of the $133 billion Pensioenfonds Zorg en Welzijn, Zeist, Netherlands, told Towers Watson.
Norway's Government Pension Fund, Oslo, ranked second with $551 billion, after sustaining an annualized 15.1% growth rate in local currency terms since 2005. The fund's asset size was further helped by a currency that gained an annualized 2.9% against the U.S. dollar in the same period. The Norwegian figure represents the combined assets of the Government Pension Fund Global and Government Pension Fund Norway.
The $319 billion Stichting Pensioenfonds ABP, Heerlen, Netherlands, claimed the No. 3 spot, helped by a euro that has strengthened 2.4% on average each of the past five years. Korea's $289 billion National Pension Corp., Seoul, and the $264 billion Federal Retirement Thrift Investment Board, Washington, rounded out the top five.
General Motors Co., Detroit, fell out of the top 20 to rank 22nd with $102 billion in combined DB and DC assets, while Ontario Teachers' Pension Plan, Toronto, took over the No. 20 ranking with $108 billion in retirement assets.
The top 20 funds grew by 11.8%, nearly a full percentage point faster than the entire 300, to $4.96 trillion in 2010. That's on par with the past five years: top 20 funds delivered an annualized 7.1% vs. 6% growth for the top 300 in the period. (However, most of the top 20's aggregate outperformance came in 2008, when the funds fell just 4.1% vs. 12.6% for the entire 300.)
The weighted average asset allocation for the top 20 funds was 50% bonds, 37% equities and the rest alternatives and cash. That reflects high bond allocations by Japan's GPIF and other Asia-Pacific funds, where the average bond allocation was 67%. North American funds, meanwhile, invested more than half their assets in equities.
Among all funds, public-sector retirement plans constituted 39% of total assets, followed by sovereign wealth funds, 29%, corporate plans, 19% and industry-based plans, 13%. When viewed in terms of average asset size per fund, sovereign funds were the largest, with an average $141 billion of assets per fund, followed by public funds, $43 billion; industry plans, $27 billion; and corporate plans, $23 billion.