The world's largest 100 asset owners now hold a record $26.3trn in total assets, although pension funds saw the smallest growth rate, with assets held rising by 8.9 per cent from the previous year, analysis from Thinking Ahead Institute (TIA) has revealed.

The research showed that the assets of the top 100 asset owners globally saw a return to growth in 2023 after a fall of 8.7 per cent in 2022, with the 12.3 per cent year-on-year increase helping to recover losses from the previous year.

However, the Asset Owner 100 study also revealed an evolving split between different types of asset owners.

In particular, the report showed that while pension funds still form the largest assets under management by fund type (51.2 per cent), this group saw the smallest growth rate, with assets held rising by 8.9 per cent from the previous year.

In comparison, Sovereign Wealth Funds (SWFs) remained a dominant force among other types of asset owners, and now manage nearly two-fifths (38.9 per cent) of the assets among the AO100, or nearly two-fifths.

According to the study, pension funds have represented a declining proportion of the top 100 asset owners in North America and Europe, the Middle East and Africa (EMEA) since 2017, falling in favour of Outsourced CIOs and SWFs’ accelerated growth.

This pattern was particularly pronounced across the EMEA, where SWFs now form 70 per cent of total assets. In comparison, SWFs manage 43 per cent of assets in the Asia–Pacific (APAC) region, and 2 per cent in North America.

Despite this, the Government Pension Investment Fund of Japan remained the largest single asset owner in the world, with an AUM of US$1.59trn alone.

The top three also included the two largest sovereign wealth funds, as Norway’s Norges Bank Investment Management, which is responsible for the investments of Norway’s Government Pension Fund Global (GPFG), was in second place with AUM of US$1.55trn, while China Investment Corporation was third globally with US$1.24trn.

Despite the return to growth, and central banks beginning to implement gradual rate cuts in the latter half of 2024, TIA director, Jessica Gao, warned that market volatility remains high with uncertainty due to geopolitical events and several major elections.

“Meanwhile, the rise of political influence amid the increase in geopolitical risks, major elections, and use of monetary policy to tackle inflation has necessitated asset owners to take a more sophisticated approach in managing the intersections between financial return and regulatory compliance," she continued.

"During this period of volatility, leading asset owners strived to balance political influence and achieve positive sustainability impacts, while operating in macroeconomic environments of high uncertainty.

“Technology and more fundamental change – including to the global climate – are accelerating factors too. Traditional risk management relying heavily on historical data and linear models struggles to keep up with today’s complex, interconnected risks.

"A new approach will be required to understand and manage risks that arise from complex, systemic sources with limited historical precedent.”

This article was originally published on our sister title, Pensions Age.

---