Europe, the Middle East and Africa made up the remaining 32% with $7.6 trillion in assets.
The previous year, however, APAC had the biggest share of assets with $9.27 trillion, which accounted for 36% of the total assets of the top 100 asset owners globally. North American ranked second, with 34% or $8.6 trillion in assets, followed by EMEA with $7.78 trillion or 30% of total assets.
The Asia-Pacific region's drop in assets is partly explained by the removal of several funds such as the Hong Kong Monetary Authority from the ranking because of a recategorization of these funds as central banks instead of sovereign wealth funds, explained Jessica Gao, director at the Thinking Ahead Institute, in an interview.
In addition, "asset owners from sovereign wealth funds to pension funds have navigated a year when volatility and uncertainty in the global economy have been at their highest in a generation — with often divergent outcomes," Gao said in a news release about the study.
"The disruption caused by elevated inflation and increased interest rates has affected equity and bond markets on a global scale, putting extra pressure on asset owners to reassess and adjust their strategies," she said in the release.
The study highlighted rising interest among asset owners to shift their asset allocation methodology to a total portfolio approach, in which investment managers set goals from a total portfolio level, from a strategy asset allocation approach, in which target allocations are set for each asset class.
It also highlighted the growing need to take into consideration systemic risk, perhaps now more than ever because of sustainability concerns.
"Systemic risks are always with us," Gao said in the interview. "But with the increase of climate change-related stress and other sustainability issues, we think systemic risks are rising fast. The industry was built on 'chasing return' and 'efficiency,' but this is likely to change as we transition to a sustainability era where funds will be tested on resilience and their risk management."
To do so, asset owners will need to better understand key strategic trends in terms of infrastructure and ecosystems, and build up the right mindset and skill sets, she added.
"Taking a holistic approach to risk management would be key. The practice of system stewardship and asset owners positively influencing the health of the system is important. Large asset owners, in particular as universal owners, will benefit from better beta," she said.
The study also highlighted a growing recognition of the significance of artificial intelligence and data-driven strategies among asset owners, even if the development of the technology remains in the exploratory stages for now.
"Asset owners are increasingly focused on AI development, with some of the largest preparing to invest more in this field," she said. "In the initial phases, AI is expected to be notably beneficial in managing and processing data — enabling handling of larger volumes, diverse sources, improved quality and enhanced reliability. Another area of focus is likely to be the improvement of operational efficiency."
The top 10 pension funds remained the same as last year, with the only exception being Singapore's Central Provident Fund, which rose a notch to seventh with $407 billion in assets, and the National Social Security Fund, Beijing, which fell one rung to eighth with $347 billion in assets.
The top three pension funds remained the same. Government Pension Investment Fund, Tokyo, ranked first with $1.45 trillion; National Pension Service, Jeonju, South Korea, stayed in second with $706 billion; and Federal Retirement Thrift Investment Board, Washington, was third with $690 billion in assets.
Among sovereign wealth funds, Asian funds, mostly from the Middle East, China and Singapore, dominated the top 10 spots. The exception was Norges Bank Investment Management, Oslo, which retained its top position with $1.25 trillion.
China Investment Corp., Beijing, with $1.15 trillion, took second; and SAFE Investment Co., Beijing, with $1.03 trillion, was third.
Abu Dhabi Investment Authority retained its fourth-place position with $831 billion in assets, and Kuwait Investment Authority rose one spot from last year to fifth with $769 billion.
Singapore's GIC and Temasek took sixth and ninth place, with $690 billion and $298 billion in assets, respectively.
While most funds saw their assets decline year over year, Public Investment Fund, Riyadh, Saudi Arabia, had an increase to $620 billion from $480 billion, moving it to seventh from eighth in the ranking.
"As understood from the PIF annual report, their growth was more due to capital injections and debt rather than positive returns," Gao said.
