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Asset owner giants grow capital, sway

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The world’s largest asset owners now account for more than one-third of all asset owner capital, exerting a greater influence over investors and society, according to new research.

New findings from Willis Towers Watson’s Thinking Ahead Institute has shown the world’s 100 largest asset owners (AO100) grew by 6 per cent last year to reach over US$20 trillion ($27.4 trillion).

Pension funds remained the largest group of asset owners accounting for more than 60 per cent of assets, followed by sovereign wealth funds (32 per cent) and outsourced chief investment officers and master trusts combined (7 per cent).

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Roger Urwin, co-founder of the Thinking Ahead Institute commented, with responsibility for more than one-third of all asset owner capital, the top 100 owners’ sway for other investors and society is “growing and becoming more important”. 

Six Australian owners were on the list. AustralianSuper topped the local ranks, coming in at 43rd globally with its US$129 billion. Future Fund followed, at 57th and with US$99.8 billion and the NSW state treasury’s TCorp was 85th, with US$74.7 billion.

The other three local asset owners were Nulis Nominees (US$72.2 billion), Aware Super ($71.9 billion) and BT Funds Management ($65.1 billion). 

Jessica Melville, head of strategic advisory, investments at Willis Towers Watson Australia said the relative influence of assets owners compared to asset managers has risen, in part through the building of larger teams with stronger leadership. 

“Governance is improving but has historically lagged other financial services organisations; we suggest that there are up to 20 very large asset owners globally that are well-governed, with effective cultures, providing leadership for others as considerable force for change,” Ms Melville said.

“The business of model of asset owners is evolving, and we can expect further saver and investor protection regulations. This leads to a very confusing picture, at least in the short term.”

Growing ESG adoption

The AO100 has become more prominent in integrating ESG and being more active owners, including aiming for real-world impacts in their strategies. 

Such changes have included factoring in member views, adopting new investment benchmarks, reporting on the impacts of investment strategies via the Task Force for Climate-related Financial Disclosures (TCFD) and the UN Sustainable Development Goals (SDGs) and reducing carbon emissions from portfolio holdings. 

“At the larger end of the AO100, funds are pursuing so-called universal owner strategies which contribute to safeguarding the financial system and addressing other systemic risks, including climate change, without sacrificing risk-adjusted returns,” Mr Urwin said.

Universal owner strategies are reported to be highly collaborative and involve working through industry groups, such as the Principles for Responsible Investment (PRI) and Net-Zero Asset Owner Alliance. 

“Increasing numbers of the AO100 are following nation states and corporations in declaring their intention to align with the Paris Agreement and be net-zero by 2050, via their investment portfolios,” Mr Urwin said.

“This is an ambitious goal and will require new types of investment mandates that explicitly incorporate a third dimension of investment after risk and return: impact.”

Another challenge noted for asset owner giants included developing a strategy for investing in mainland Chinese assets.

 

Asset owner giants grow capital, sway
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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