The New Zealand Superannuation Fund (NZS) climbed more than 50 places in the latest Towers Watson survey of the world’s largest pension funds.
According to the Towers Watson survey (produced in association with US-based publication Pensions & Investments), as at the end of 2014 the NZS sat at 224 on the list of the top 300 pension funds compared to its ranking of 276 a year previously.
With just over US$18.3 billion under management as at December 31 last year, the NZS is sandwiched between the Los Angeles Fire and Police scheme at 223 on the list and the Siemens pension fund of Germany at 225.
The NZS also rose in the sovereign pension fund rankings year-on-year, coming in at 24th of the 27 entities listed by Towers Watson in that category, compared to 26th in the 2014 report.
Towers Watson defines sovereign pension funds as those “established by national authorities for the meeting of pension liabilities”.
“We acknowledge that there are many other state-sponsored funds established – we have attempted to restrict this list to funds specifically sponsored by national authorities,” the report says.
According to the report, total sovereign pension fund assets stood at about US$4.2 trillion as at the end of December 2014 while the broader sovereign wealth fund (SWF) universe accounted for just over $7 trillion.
However, the report cites statistics from the SWF Institute showing “sovereign wealth funds’ assets grew by 5.5% during 2014, compared to 0.6% for the sovereign pension funds in the TW/P&I 300 study”.
The three largest sovereign pension funds – Japan, Norway and South Korea – also filled the top three spots in the overall Towers Watson list with assets under management of US$1.14 trillion, US$884 billion, and, US$429 billion respectively.
In total, sovereign funds made up 27.6 per cent of all pension assets in the Towers Watson survey, down slightly on the December 2013 figure of 28.3 per cent.
“The 114 public-sector funds in the research had assets of US$6 trillion in 2014 and account for 39% of the total,” Towers Watson said in a statement. “Private-sector industry funds (60) and corporate funds (99) account for 14% and 19%, respectively, of assets in the research.”
Total pension fund assets in the survey tipped over $15 trillion over the 2014 calendar year – almost double the 2004 figure.
In the statement, Chris Ford, global head of investment at Towers Watson, said while pension liabilities have also expanded over the last 10 years, the result “still represents a significant increase in savings wealth”.
“However there is a growing feeling that the investment industry, despite having grown assets, has not focused enough on the end beneficiaries’ needs or on managing costs in the ‘investment food chain’,” Ford said. “Instead it has focussed on relative returns over total returns, and has allowed excessive risk to build up in portfolios at the same time as costs have increased to a level that is far higher than can be justified in aggregate. The top funds are already moving to address this and related issues and we can expect a very different industry in ten years’ time – or sooner given the inexorable shift to DC [defined contribution] where the end beneficiary does indeed come first.”
He said many large funds were also rethinking investment strategies by targeting ‘added value spaces’, considering diversification across “all return drivers”, and improving governance.
“This is likely to increasingly polarise winners and losers and could reshape the investment industry, completing the shift away from siloed – and indeed expensive – ‘asset class’ thinking and increasingly breaking down the distinction between ‘traditional’ and ‘alternative’ investments,” Ford said.