Size really does matter when it comes to the investment performance of the world’s largest pension schemes.
The top 20 retirement funds in the world by assets under management grew their assets by 5.5 per cent between 2019 and 2024 2024, versus 4.4 per cent per cent from the next 30 biggest and 4.6 per cent for the top 300 overall.
Figures from The Thinking Ahead Institute (TAI), a not-for-profit research and innovation network founded by consultancy WTW, reveals AUM in top 300 funds increased by 7.8 per cent in 2024, compared to an increase of 10 per cent in 2023.
The top 20 pension funds account for 42.4 per cent of total AUM in 2024, up from 42.1 per cent in 2023.
Jessica Gao, director at the Thinking Ahead Institute, says growth has been slower for global pension funds, following records achieved in 2021, as decision-makers negotiate notable headwinds.
“The world’s largest pension funds are navigating an increasingly complex landscape. Macroeconomic volatility, geopolitical shifts and concentrated market risks are reshaping return expectations. The current backdrop has tested even well-diversified portfolios, highlighting the difficulty of today’s investment environment,” Gao says.
A spokesperson, for the Government Pension Fund, Norway, which, with USD 1.768 trillion in assets, has overtaken the USD 1.646 trillion Japanese Government Pension Investment Fund as the largest in the world, identifies the challenges: “The world fragments into multiple economic blocs with reduced levels of co-operation. This leads to increased trade barriers, stricter regulation and reduced foreign investment. Developing countries are hit particularly hard. Decreased economic co-operation leads to lower global growth, higher inflation and increased market volatility.”
Gao adds that funds also face more demanding relationships with stakeholders, from regulators to sponsors to members, all of whom are raising expectations on how pensions are managed.
“These intersecting challenges are heightening the responsibilities of fiduciaries, making strong governance more important than ever,” she says.
The report reveals an increasing reliance on technology across the investment industry, transforming how pension funds manage assets, assess risk and make decisions.
More than half (59 per cent) of defined contribution (DC) peers allocate more than 10 per cent of their internal budgets to technology, and just under half (47 per cent) expect to increase that over the next five years
Gao says: “AI is revolutionising how funds communicate with members, raising the standard for engagement through personalised, timely, and highly customised interactions that align with individual needs and preferences. It is becoming central to portfolio management, enhancing risk assessment, decision-making, and dynamic allocation, ultimately allowing funds to deliver more resilient and member-focused investment outcomes.”
The relative success of the world’s largest pension funds compared to their smaller peers will be more ammunition for the UK government in its pursuit of megafunds in the UK, which it says deliver better value for members.
Reforms set to be introduced through the Pension Schemes Bill will mean all multi-employer DC pension schemes and the Local Government Pension Scheme pools operate at megafund level, managing at least GBP25 billion in assets by 2030.
Chancellor Rachel Reeves says evidence from Australia and Canada’s megafunds demonstrate that investing in private markets – an activity typically the preserve of the largest funds – “boosts the economy while potentially driving higher returns for savers”.
