Assets under management (AUM) at the world’s 300 largest pension funds fell in value by 0.4% to a total of US$18 trillion in 2018, in sharp contrast to an increase of 15.1% in 2017, according to the latest World 300 research from the Thinking Ahead Institute.

The research, conducted in conjunction with Pensions & Investments, a leading U.S. investment newspaper, shows that the value of the top 20 pension funds’ AUM fell by 1.6% in 2018, equating to 40.7% of the total AUM in the rankings. This is the first year since 2012 that the top 20 funds’ share of the total AUM has fallen. However, the top 20 funds’ growth rate of 4.7% during the period 2013 to 2018 remained higher than the growth rate of 3.9% for the top 300 funds during the same period.

Bob Collie, Head of Research for the Thinking Ahead Group, said: “A tougher market environment in 2018 meant AUM growth paused, but the underlying trend remains one of growing pension markets worldwide. The pace of change in the investment world is a challenge, and scale is a huge advantage in a lot of ways. Many of the most interesting and important developments start with the largest funds, and as new investment ideas like the total portfolio approach and universal ownership gain traction in these organisations, they influence the whole market. It’s particularly notable that a majority of the largest funds are now highlighting the importance of sustainability. ESG factors are now significant financial considerations. Beyond that, there’s also an evolving recognition of the role large investors play within society, and the responsibility that comes with it.”

Among the top 300 funds, defined contribution (DC) assets increased by 5.1% during 2018, while defined benefit (DB) assets declined by 0.2%. DB funds account for 64.7% of the total AUM, with this share remaining unchanged from the previous year. However, the share of DB funds slightly decreased across all regions – with the exception of Europe where the same level was maintained. DB plans dominate in Europe, North America and Asia-Pacific where they represent 53.7%, 74.2% and 65.1% by assets respectively, whereas DC plans dominate 70% of assets elsewhere, particularly in Latin American countries.

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