Australian industry funds have rocketed up the rankings in an annual study of the world’s biggest pension funds as the mandated defined contribution system continues to fuel the industry’s growth.
As in previous years, there were 16 local superannuation funds included on an annual list of the globe’s 300 biggest pension funds. This year, 12 of those funds improved their ranking over the year ended December 31, 2016.
Willis Towers Watson’s latest Global Pensions Asset Study showed that 16 Australian funds in the survey collectively boosted their assets under management (AUM) by an average of 9.1 per cent, compared with the global average among the top 300 of 6.1 per cent.
Among the 20 biggest pension funds in the world, the average rate of AUM growth was 7.1 per cent.
As expected, the Willis Towers Watson study ranked Australia’s sovereign wealth fund, The Future Fund, as the country’s largest pension manager, placing it 32nd globally. Industry fund giant AustralianSuper was the nation’s second largest pension manager, in 36th place globally, while QSuper placed 72nd globally.
The 16 Australian funds included in the top 300 remained unchanged from the 2015 report. The world’s top 300 pension funds together represent 43.2 per cent of global pension assets, up from 42.5 per cent in 2015. Australian funds collectively accounted for 3.5 per cent of the total, up marginally from 3.4 per cent a year earlier.
Of the 16 Australian funds included in the study, Telstra Super was once again the only corporate fund in Australia to make the top 300.
The largest climbers in the rankings, among Australian funds, were Hostplus (up 27 places), REST (rising 14 places), Sunsuper and HESTA (both up 13 places).
Speaking to Investment Magazine, the investment chiefs of Hostplus and REST both cited active management in equities and a commitment to unlisted assets as central to their success.
REST general manager investments Brendan Casey attributed the fund’s strong growth and investment performance to a focus on private markets – where the fund has made the most of illiquidity premiums – and an active approach, with equity managers adding 2 per cent over the benchmark last month.
“Given that we believe all asset classes remain overpriced, our general approach is very defensive, and we’re underweight growth assets,” Casey said.
Hostplus chief investment officer Sam Sicilia said the fund had been able improve its ranking by “continuing to play to its strengths”. Sicilia said Hostplus had long maintained a commitment to active management and unlisted assets as two key planks of the fund’s investment strategy.
Sicilia said Hostplus had made “only very marginal” changes to its strategic asset allocation to unlisted assets over the past decade. “Our investment beliefs have stayed solid,” he said.
While Hostplus has also put much effort into reducing costs to deliver lower fees, Sicilia said this would not diminish its commitment to unlisted assets, which has delivered superior net returns to members.
“We believe in being fully invested at all times, rather than waiting for the storm to pass,” Sicilia said. “When the world is in unchartered waters, and politics is the main driver, history is not a good guide to how markets will behave.”
The Willis Towers Watson Global Pensions Asset Study found the world’s top 300 funds grew by US$15.7 trillion ($19.7 trillion) over the year to June 30, 2016.
Willis Towers Watson Australia senior investment consultant Alex O’Dea said any of the leading asset owners around the world that had improved their rankings shared an ability to adapt to the ever-changing investment environment, had made governance improvements, and demonstrated an ability to learn from their peers.
To capture the long-term premium within a protracted low-return environment, O’Dea said, it was incumbent upon asset owners to further expand their skills.
O’Dea added that an increased interest in sustainability were notable in 2016, both in integrated ESG practices and in stronger stewardship practices.
“Characterising leader funds is their ability to innovate, through more streamlined asset allocation, factor strategies and other smart betas – and better methods of accessing private markets,” O’Dea said.
Australian funds included in the Willis Towers Watson Global 300 (US$ millions)
||First State Super
||REST Industry Super
Fund data as at December 31, 2016
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