Report on pension funds’ long-term investments
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21/04/2016 - G20 leaders have identified the facilitation of long-term financing from institutional investors as a priority for helping to achieve targets for future growth and employment. A contribution from the the G20/OECD Task Force on Long-term Investment Financing by Institutional Investors, this annual survey is designed to illuminate the role that large institutional investors can play in providing a source of stable long-term capital.
In 2014, retirement systems in the OECD – comprised of pension funds and public pension reserve funds – held USD 30.2 trillion in assets, a number now well above pre-crisis levels. In that same year, the combined GDP of the OECD countries was USD 48.8 trillion. In 2001, OECD retirement system assets represented 51.8% of GDP; this number has since grown to 61.9% of GDP, highlighting the growing role of institutions as financial intermediaries. Put another way, the accumulation of savings in such financial channels has never been larger, which underscores the important role that institutions can play as sources of productive long-term capital.
The total amount of assets under management for the Large Pension Funds (LPFs) for which data was received or obtained was USD 3.7 trillion at the end of 2014. The assets put aside by the largest pension funds for which we received data increased by a robust 11.6% on average between 2013 and 2014 (through asset appreciation and/or fund flows). Trailing five-year real annualised returns were positive for all funds, where history was available.
Sovereign Wealth Funds (SWFs) and Public Pension Reserve Funds (PPRFs) are becoming major players in international financial markets. Total amounts of PPRF assets were equivalent to USD 6.6 trillion by the end of 2014 for the countries in which data was received or obtained. PPRF assets increased 6.2% on average between 2013 and 2014 (due to asset appreciation and/or fund flows). The largest reserve is held by the United States Social Security Trust Fund at USD 2.8 trillion, followed by Japan’s Government Pension Investment Fund at USD 1.1 trillion. Canada, China, and Korea also accumulated large reserves. Of the countries surveyed, twelve had established their PPRFs since 2000. Large reserves are also accumulated in sovereign wealth funds that have a pension focus.
The survey provides a source of information for policy makers and institutional investors alike in order to help advance the policy agenda on long-term financing by institutions. Recent initiatives such as the Juncker Plan in Europe and the Build America Investment Initiative launched by the Obama Administration provide examples of government-led projects to mobilise private capital for long-term financing. In particular, the data on infrastructure investments can help provide context as such initiatives advance from the planning stages to eventual realisation.
The survey includes 75 retirement schemes, consisting of a mix of defined benefit and defined contribution pension plans (mainly public sector funds, but also corporate funds) that together total USD 3.9 trillion. Data for 50 schemes were provided by the large pension funds directly. Data for the other 25 came from publicly available sources. This information is presented in combination with the OECD Public Pension Reserve Funds survey. Altogether, data were compiled for 104 institutional investors from 35 countries around the world including some non-OECD countries such as Brazil, India, Indonesia, Nigeria, and South Africa, accounting for over USD 10.4 trillion of assets under management.
The survey monitors and compares the investment behaviour, asset levels, and performances of the largest institutional investors in each region or country covered and analyses in greater depth the general trends observed at a national level. This survey is based on a qualitative and quantitative questionnaire sent directly to Large Pension Funds and Public Pension Reserve Funds. It is part of the OECD Project on Institutional Investors and Long-term Investment. The insights and detailed investment information collected complement the administrative data gathered through the Global Pension Statistics Project.
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