In 2023, the world’s 300 largest pension funds’ assets under management increased by 10 per cent to US$22.6 trillion, compared to $20.6 trillion at the end of 2022, according to a new report by WTW’s Thinking Ahead Institute.

It found the top 20 largest global pension funds’ AUM increased by 12 per cent during the past year and by 5.4 over the past five years, outpacing their smaller peers.

The Government Pension Investment Fund of Japan remained the largest pension fund in the world, with AUM of $1.59 trillion, a position it has held since 2002. The Government Pension Fund of Norway was the second largest, with AUM of $1.58 trillion.

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Overall, defined benefit pension plans represented the largest share of assets, accounting for 61 per cent of total disclosed AUM, followed by defined contribution plans (26 per cent) and reserve funds (12 per cent). DB plans accounted for the majority share of assets in North America (72 per cent), Asia-Pacific (63 per cent) and Europe (46 per cent) in 2023, while DC plans dominated other regions (68 per cent), particularly in Latin America.

On average, the top 20 largest pension funds invested roughly 43 per cent of their assets in equities, 35 per cent in fixed income and 22 per cent in alternatives and cash. North American pension funds had an average equity weighting of 45 per cent and just 23 per cent in bonds, while European plan sponsors had the lowest weighting to equities at 31 per cent (compared with bonds at 58 per cent) and Asia-Pacific plan sponsors were fairly balanced with 45 per cent in equities and 48 per cent in bonds.

“While it is positive to note a return to growth among the world’s largest pension funds in 2023, the combination of a more uncertain macroeconomic environment and rising geopolitical instability means there is increasing complexity in the investment landscape,” said Jessica Gao, director of the Thinking Ahead Institute, in a press release.

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