After a modest decline the previous year, assets of the world's 300 largest retirement funds rebounded by 8% to $19.47 trillion in 2019, in what would prove to be the calm before 2020's coronavirus storm, according to the latest annual survey by Pensions & Investments and Willis Towers Watson PLC's Thinking Ahead Institute.
With the latest year's tally, growth for the past five years averaged a respectable 5%, said Marisa A. Hall, London-based co-head of the Thinking Ahead Institute, in an interview. But in the wake of the COVID-19 crisis and the extraordinary policy response to it, the outlook for the coming five years looks considerably tougher, Ms. Hall added.
The latest survey showed big funds were facing a challenging environment even before the unprecedented market and policy fireworks of 2020.
Retirement plans in 2019 were "increasingly stretching their risk budgets," even as they worked to add governance muscle in order to take on more risk in a responsible way, the survey report noted.
Solvency concerns were driving plan executives further out along that risk spectrum last year as they struggled to match their liabilities, Ms. Hall said. Meanwhile, it's uncertain whether conditions this year — even further removed from business as usual — may yet become a new normal, she added.
The survey report found that along with solvency concerns, "stakeholder expectations, COVID-19 ramifications, sustainability pressures and other challenges have compounded to make pension fund boards' agendas more complex and stressed than at any previous times."
In response, big funds in 2019 continued "to develop stronger governance capabilities supported by larger spends on people and technology," the report said.
At a moment when the global economy remains in a deep hole and unorthodox policy action by governments and central banks remains likely, governance is all the more important, Ms. Hall said. "It's definitely new times" and with further disruption to come, "having strong beliefs (and) being able to be responsive while still sticking to what your intentions and your objectives are as an asset owner" will be valuable, she said.