Assets of the world’s top 300 retirement plans increased by 10% in 2023 to a total $22.64 trillion, staging a recovery from their 12.9% decline in 2022, according to the according to the latest annual survey by Pensions & Investments and Willis Towers Watson PLC's Thinking Ahead Institute.
The plans benefited from the recovery of markets, which have picked up momentum and generally did better in 2023, said Jessica Gao, London-based director at the Thinking Ahead Institute. “But we still have interest-rate pressure so funds are working hard to look for that extra return,” she said. The survey covers asset owners including public and corporate pension funds, defined contribution plans and state-owned pension funds and features data up until Dec. 31.
The top 20 retirement funds outperformed the top 300 plans, with growth at 11.6%. The 20 largest plans also grew as a percentage of total assets, to 42.1%, compared with 2022’s 41.5%.
European plans in the top 20 ranking performed best among the regions, with assets increasing by 18.6% in 2023 to account for 25.2% of the top 20 funds, while Asia-Pacific funds grew 10% and U.S. funds grew 8.3%.
The share of U.S. funds in the top 20 fell to 25.4% from 26.1% the year prior and the share of Asia-Pacific funds in the top 20 fell to 42.5% from 43.1%.
The MSCI All Country World index saw 22.8% returns in 2023 as both emerging and developed markets had positive returns of 10.3% and 24.4%, respectively.
But while market performance contributed positively to retirement plans' asset growth in 2023, executives remain concerned for the outlook. More than half of the top 20 plans in their annual reports voiced concern over high inflation in the global economy, geopolitical tensions and the resulting rise in interest rates and global uncertainty.
“Volatility of the financial landscape remains. The impact of high inflation and high interest rates create both uncertainty and opportunities for the fund. Nevertheless, it’s essential to remember that as a long-term investor we prepare for these market fluctuations over the course of several decades,” California Public Employees’ Retirement System, Sacramento, was quoted as saying in the report. CalPERS had $452.5 billion in assets as of Dec. 31.
Around half of the top funds also reaffirmed their commitment to sustainable and responsible investment by implementing best practices in corporate governance.
“Climate risk management is a priority for responsible investment, and in 2023 Norges Bank published sharpened expectations for how companies should manage climate risk and views on the use of voluntary carbon credits. A number of companies in the portfolio committed to net-zero carbon emissions during the year,” Norway's Government Pension Fund Global, Oslo, was quoted as saying.