Data and Research December 1, 2022

Growth Continued in 2021 For the Largest Investors, Assets Near $26 Trillion

Pension funds make up the majority of the world’s 100 largest investors, which all grew 9% in 2021, a WTW study shows.

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Showing a strong forward momentum, the world’s 100 largest asset allocators saw assets grow 9% last year, a slowing from 2020’s growth rate, 16%. Total assets reached $25.7 trillion in 2021, according to new research by WTW’s Thinking Ahead Institute.

Pension funds are the largest component of the group, accounting for 56% of total assets, slightly down from 58% the previous year. Sovereign wealth funds have seen their share rise to 37%, up from 35% the previous year. This is the fifth year of the WTW study.

The Government Pension Investment Fund of Japan is still the biggest asset owner at $1.7 trillion, with two sovereign wealth funds in second and third: Norges Bank Investment Management ($1.4 trillion) and China Investment Corporation ($1.2 trillion). The biggest U.S. institution listed was California Public Employees’ Retirement System, in 12th place with $497 billion.

The top 20 asset owners control $14.1 trillion, a majority (55%) of the top 100’s allocated assets. Such concentration has been the case since the survey started.

Due to the turmoil the world has been through of late, the WTW study showed that many allocators are uncertain about how to deal with a nebulous future, yet they maintain tight discipline to prepare for whatever may come.

“With the macro being complex and uncertain, long-horizon investing principles provide a crucial set of guardrails,” the report commented.

Among problems that the 100 institutions list are cybersecurity and a shortage of talent. The report spotlighted the recent problems with the British pension system, contending that the “most recent liquidity crisis associated with the liability-driven investment funds in the U.K. DB market raised questions about the future of defined benefit schemes.”

The survey also found that hybrid working arrangements have “resulted in weakened culture and declined social capital.” 

Allocators are increasingly focused on environmental, social and governmental matters, the report found. It observed that “some asset owners are stepping up and moving beyond the impact of ESG risks on the portfolio to consider the impact of the portfolio and the assets on the world.”

Asset owners “have a distinctive opportunity to contribute to real-world systemic change by contributing to a Paris [Agreement]-aligned future, consistent with net-zero emissions by 2050,” commented Roger Urwin, co-founder of the Thinking Ahead Institute, in a statement. 

Compliance December 1, 2022

Senator Cardin Worried SECURE 2.0 Won’t Pass This Year

The Maryland Democrat expressed concern at an industry conference that there might not be enough time in this legislative year to pass SECURE 2.0.

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Senator Ben Cardin, D-Maryland, expressed concern that the SECURE 2.0 retirement reform legislation might not pass this year while speaking at Thursday’s Employee Benefit Research Institute Retirement Summit on Thursday.

Cardin participated in an online discussion with retiring Senator Rob Portman, R-Ohio, hosted by Eric Stevenson, president of Nationwide Retirement Plans. Cardin and Portman are both well known for their longstanding advocacy on retirement issues.

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Though Cardin said he was “optimistic” that SECURE 2.0 would pass and that there is no “controversy on substance,” he expressed misgivings that there would be enough time for the legislative package to pass both chambers of Congress before the next Congress is sworn in on January 3, 2023.

Cardin explained that they are looking for “a vehicle” (most likely a must-pass budget bill) to get the legislation passed, such as an end-of-year omnibus spending bill. He also said Congress has many other priorities this month, and there simply might not be time for SECURE to pass.

Cardin even went so far as to encourage those in attendance to reach out to their legislators and tell them to pass SECURE 2.0. This remark at a minimum suggests genuine concern that SECURE 2.0 might get deprioritized and fail to pass.

Portman neither elaborated on nor challenged Cardin’s characterization of the situation.

Though industry watchers had been optimistic that SECURE 2.0 would pass in December, Cardin and Portman are both members of the Senate Committee on Finance, which unanimously passed the Enhancing American Retirement Now (EARN) Act. It is one of three bills, another in the Senate and one in the House, that would need to be reconciled into one before being passed in both houses.

The legislation aims to expand access to employer-sponsored retirement plans through a range of provisions such as allowing student debt payments to be matched as employer retirement contributions, providing tax incentives to businesses to start plans and creating emergency savings accounts.

If SECURE 2.0 does not pass this year, the legislation must be re-proposed in both houses. Legislators would be free to borrow from the old text and earlier negotiations in the new proposal. However, restarting the process afresh, even if not revising the substance, could significantly delay the timing of its passage.

Since SECURE 2.0 has widespread bipartisan support, it is unlikely that Republican control of the House of Representatives in the new Congress would obstruct the passage of the legislation.

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