Report on pension funds’ long-term investments
17/12/2014 - 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.
Highlights from the report include:
- Assets under management by the largest funds in the world reached new high levels, and the financial positions of pensions, with some exceptions, have improved as the recovery advances.
- Emerging practices and trends contained in the report indicate that large pension funds are adapting to the challenging investment environment. One salient trend was the increase in alternative assets in both large pension funds and public pension reserve funds.
- Several large funds expressed a desire to increase private markets exposure, especially in situations of direct ownership.
- Investment allocations to unlisted infrastructure have been on average low, but stable, for those funds that reported exposure. For most funds, investment levels are below targets (where reported targets are available) and several funds that do not invest in infrastructure reported plans to launch allocations in coming years, indicating a growing demand for infrastructure investments.
- Institutional investors are taking different approaches to infrastructure investment, owing to a large dispersion of investor circumstance, making both debt and equity infrastructure investments potentially attractive.
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.
DOCUMENTS AND LINKS
Project on Institutional Investors and Long-term Investment
G20/OECD High-Level Principles on Long-Term Investment Financing by Institutional Investors
G20-OECD work on long-term financing
Trends in Large Pension Fund Investment in Infrastructure
Global Pension Statistics Project
IN THE NEWS
Pension funds can and should invest more in infrastructure
The Economist, 26 Oct 2013