AustralianSuper is now the world’s 20th largest pension fund

The country’s largest retirement investor has overcome negative returns to rank among the largest. Australia has three of the 50 biggest superannuation funds.

Paul Schroder the chief executive of AustralianSuper, now one of the world’s largest superannuation funds. Picture: Chris Pavlich

AustralianSuper has rebuffed a sluggish dollar and its first negative return since the Global Financial Crisis to join the ranks of the world’s largest pension funds.

Research from the Thinking Ahead Institute showed that the behemoth’s moved up two spots to be the 20th largest fund in the world $US169.1bn ($249.3bn) in assets under management in 2021.

Mergers with LUCRF Super and Club Plus Super in June and December 2021 respectively helped the country’s largest fund offset volatile headwinds which saw its balanced fund book a 2.7 per cent negative return in the 12 months to June 30.

“This trend of consolidation has intensified as result of the Australian government’s Your Future, Your Super reforms, and we expect to see an increasing presence of Australian funds at the higher ends of the survey in future years as more fund mergers occur,” WTW Australia director of investments Jonathan Grigg said.

The 2021 rankings, which measured the total assets under management of the world’s pension funds, showed Australia had three funds among the largest 50 with the Future Fund ranked 26th, down one place, with $US147.9bn under management. Aware Super slid seven places to 46, according to the latest rankings.

The Government Pension Investment Fund of Japan remained the largest pension fund with $US1.7 trillion in assets under management. It has been on top of the rankings since 2002. The Government Pension Fund of Norway was the only other fund to have over $1 trillion in assets.

South Korea’s National Pension, the US’s Federal Retirement thrift and the Netherlands’ ABP Mr Grigg said the number of Australian funds in the top 300 fell by one to 15th in 2021.

“We’ve seen the prominence of Australian funds within the survey wane modestly, with most Australian funds included falling in the rankings relative to last year, partly due to a weakening Australian dollar over the course of 2021,” he said.

Prior to the completion of its merger with Sunsuper, QSuper was the only other fund beside AustralianSuper to improve its ranking, up nine places to 54th with $US96.53bn under management. UniSuper ranked 77th with $US82.06bn under management, down from 70th, Sunsuper ranked 87th compared to 81st.

The reversal came as global assets under management by the world’s largest pension funds slowed from 11.5 per cent in 2020 to 8.9 per cent in the past year.

Thinking Ahead Institute co-head Marisa Hall said while the slowdown was expected, the long-term dashboard was flashing amber for the sector with funding status of pension funds potentially endangered from rising inflation and a faltering economy.

“Pension funds are also under immense governance pressure from all sides, with a growing politicisation of ESG in some regions meeting calls for substantial and urgent climate action,” she said.

“The addition of stark short-term economic pressures alongside these structural long-term changes will only add to the difficulty of balancing short-term financial resilience with long-term financial and climate sustainability,” Ms Hall added.

The US accounted for 39.6 per cent of the largest 300 pension fund by assets under management and had almost half the funds in the ranking, with 148. The UK had the next largest number of pension funds in the rankings with 23, followed by Canada’s 18 and Australia with 15.

REST, HESTA, Cbus, Hostplus, CSC, State Super ranked between 120th and 181st, while SuperSA and ESS Super saw the sharpest falls, down by about 25 places each.