ARLINGTON, Va., Nov. 27, 2023 (GLOBE NEWSWIRE) — Sovereign wealth funds now make up a record share of assets among the largest 100 global asset owners, according to new research by leading global advisory, broking and solutions company WTW’s (NASDAQ: WTW) Thinking Ahead Institute.
Sovereign wealth funds (SWFs) now make up 38.9% of total assets among the world’s largest 100 asset owners (the AO100). In absolute terms, sovereign wealth funds within the AO100 now represent $9.1 trillion. This has risen as a proportion due to a slower correction in collective assets among turbulent markets — after SWFs saw the combined effects of relative investment performance and new inflows outperform over the past 12 months compared with other types of asset owners.
As a result, pension funds only just retain the majority share of assets under management (AUM) among the AO100, with the combined assets of pension funds making up 52.8%, while outsourced chief investment officers and master trusts are responsible for the remaining 8.3% of total AUM in the AO100.
This marks a clear decline over the medium term. Five years ago, pension funds made up more than 60% of the AO100, while SWFs represented 32% (or less than one-third).
Taken as a whole, the AO100 are now responsible for $23.4 trillion as of the end of 2022 — a decline of nearly 9% compared with the previous year when this stood at $25.7 trillion for the largest 100 asset owners at the time.
Other findings from the full study by the Thinking Ahead Institute — which provides key insights and trends on the top 100 asset owners in the world — include a growing concentration of assets at the very top of the rankings across all types of organizations and differences in investment allocations.
The very largest 20 asset owners in the world now have a total of $12.9 trillion alone, meaning the largest 20 represent 55.2% of the total AUM in the top 100. This concentration at the top of the rankings is caused by a slower decline in asset values among the largest asset owners in the preceding 12 months. In fact, just the top five asset owners accounted for 24.4% of total AUM in the study, with U$5.7 trillion.
The Government Pension Investment Fund of Japan remains the largest asset owner in the world, with an AUM of $1.4 trillion alone. The top three also include the two largest sovereign wealth funds. Norway’s Norges Bank Investment Management comes second with AUM of $1.3 trillion, while China Investment Corporation is third globally with $1.1 trillion.
North America accounts for 33.9% of total AUM in the AO100 study, making it the largest region by asset value, closely followed by Asia Pacific with 33.7% of total AUM. The Europe, Middle East and Africa region represents 32.4% of total AUM.
“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,” said Jessica Gao, director at the Thinking Ahead Institute.
“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. The shift from an era of low inflation and interest rates has given a rise to a new macroeconomic landscape that demands a fresh understanding and management approach. This is impacting different types of asset owners in different and unexpected ways.
“Despite this, we have seen some positive outcomes from such unprecedented uncertainty. New risk methodologies are emerging, from the old view of strategic asset allocation toward leading funds adopting a total portfolio approach (TPA) — where goals are the central driving force and best ideas are incorporated through a competition for capital at the total portfolio level. That has also allowed some large asset owners to ride escalating market waves with better short- and medium-term outcomes too. Meanwhile, we’ve also noticed a renewed emphasis on positive culture, when markets put asset owners and their teams under pressure,” said Gao.
The report also reveals the largest asset owners have an emerging awareness and understanding of the significance of artificial intelligence (AI) for the investment and decision-making process. Out of the 20 largest global asset owners, nine proactively reported a focus on this area of AI while 11 mentioned a growing investment in technology more broadly to support innovation.
“Globally significant asset owners are showing greater awareness and planning for globally significant trends. This has ranged, just in the past 12 months, from equally existential questions of systemic risk — from climate to geopolitics and technology. Such a breadth of threats and opportunities will require a delicate juggling act as investment organizations strive to balance their own internal investments,” concluded Gao.
Notes to editors:
Figures were the latest available as at December 31, 2022.
About the Thinking Ahead Institute
The Thinking Ahead Institute is a not-for-profit research and innovation network motivated to influence the investment industry for the good of savers worldwide and to mobilize capital for a sustainable future. Since its establishment in 2015, almost 90 investment organizations have collaborated to bring this vision to light through designing fit-for-purpose investment strategies, working toward better organizational effectiveness and strengthening stakeholder legitimacy.
About WTW Investments
WTW’s Investments is an investment advisory and asset management firm focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 colleagues worldwide, more than 1,000 investment clients globally, assets under advisory of over $4.7 trillion and $187 billion of assets under management.
About WTW
WTW (NASDAQ: WTW) provides data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you.
Learn more at wtwco.com.
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