Because of their size, the largest pension funds can wield significant market power. Here are the world’s 100 biggest pension funds.
The world’s 100 largest pension funds are now valued over $17 trillion in total, a rise of 8.5% over the previous year, as Jenna Ross of Visual Capitalist explains below. This gain came despite economic uncertainties.
The largest pension funds in the world are ranked in this chart, along with their locations, using information from the Thinking Ahead Institute (read below).
What is a Pension Fund?
A pension fund is a fund created to provide income during retirement. Four different categories are covered in this ranking:
- Sovereign funds: Funds controlled directly by the state. This ranking only includes sovereign funds that are established by national authorities.
- Public sector funds: Funds that cover public sector workers, such as government employees and teachers, in provincial or state sponsored plans.
- Private independent funds: Funds controlled by private sector organizations that are authorized to manage pension plans from different employers.
- Corporate funds: Funds that cover workers in company sponsored pension plans.
Public sector funds are the most prevalent among the biggest funds.
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The Largest Pension Funds, Ranked
The top 10 pension funds are shown here, ranked from largest to smallest.
For the twenty-first year in a row, Japan’s Government Pension Investment Fund (GPIF) is the highest in the ranking. The fund was once the largest holder of domestic stocks in Japan, but the Bank of Japan has subsequently surpassed it. Investors actively monitor the GPIF’s movements because of its massive size. For example, the fund made news when it decided to begin investing in startups, ostensibly to encourage other pension funds to follow suit.
The United States has 47 funds on the list, including the largest public sector fund, the Thrift Savings Plan (TSP), which is supervised by the Federal Retirement Thrift Investment Board. Both political parties have been accused of utilizing it as a political instrument due of its significant financial influence. Democrats have advocated for the divestment of assets in fossil fuel businesses, while Republicans have urged a ban on investment in Chinese-owned firms.
Russia’s National Wealth Fund is ranked 19th on the list. The fund is intended to support the public pension system and assist in budgetary balance when needed. With Russia’s economy struggling as a result of the Russia-Ukraine conflict, the government has used it as a rainy day reserve. Since Western sanctions have made it impossible to find replacement components for foreign planes, Russia has set aside $23 billion from the fund to replace foreign aircraft with indigenous versions.
The Future of Pension Funds
Because of their size, the largest pension funds can wield significant market power. They are, of course, responsible for delivering retirement income to millions of people. To achieve their objectives, pension funds must overcome a number of obstacles, including:
- Geopolitical conflict creates volatility and uncertainty
- High inflation and low interest rates (relative to long-term averages) limit return potential
- Aging populations mean more withdrawals and less fund contributions
In search of greater diversification and greater returns, some pension funds are resorting to alternative assets, such as private equity. These investments might, of course, also be riskier.
Number 18 on the list, Ontario Teachers’ Pension Plan, made a $95 million investment in the now-defunct FTX cryptocurrency exchange. With the investment, the plan hoped to “gain small-scale exposure to an emerging area in the financial technology sector.”
Given that the investment represented only 0.05% of the plan’s net assets in this instance, its failure is anticipated to have a negligible effect. It does, however, underscore the difficulties pension funds confront in producing enough returns in a range of macroeconomic conditions.
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