The Resurgence of Global Asset Owners: A 2023 Overview

The assets of the top 100 asset owners globally, known as the AO100, have returned to growth in 2023 after experiencing a significant decline of 8.7% in 2022. According to new research from WTW’s Thinking Ahead Institute, these asset owners now manage a staggering US$26.3 trillion, marking a 12.3% increase from the previous year.

The Dominance of Sovereign Wealth Funds

One of the most striking findings from the AO100 study is the growing dominance of sovereign wealth funds (SWFs) in the asset management arena. As of the end of 2023, SWFs manage an impressive 38.9% of the total assets among the AO100, nearly two-fifths of the total. This shift is particularly notable when compared to pension funds, which, despite holding the largest share of assets under management (51.2%), recorded the smallest growth rate at 8.9%.

The trend is particularly pronounced in regions like Europe, the Middle East, and Africa (EMEA), where SWFs now account for 70% of total assets. In contrast, North America and Asia Pacific show a more balanced distribution, with SWFs managing 2% and 43% of assets, respectively. This shift indicates a strategic pivot among asset owners, with SWFs increasingly recognized for their agility and long-term investment strategies.

The Giants of Asset Ownership

At the forefront of the global asset ownership landscape is Japan’s Government Pension Investment Fund, which remains the largest single asset owner in the world, boasting assets under management of US$1.59 trillion. Following closely are Norway’s Norges Bank Investment Management and China’s Investment Corporation, with assets of US$1.55 trillion and US$1.24 trillion, respectively. These figures not only reflect the scale of these entities but also their critical role in shaping global investment trends.

Regional Insights and Trends

The AO100 study reveals that EMEA is the largest region in terms of total assets under management, accounting for 34.3% of the AO100’s total AuM. Asia Pacific follows closely with 33.0%, while North America represents 32.7%. This regional distribution highlights the competitive nature of asset management across different geographies and the varying strategies employed by asset owners in response to local economic conditions.

Navigating Market Volatility

Jessica Gao, director of the Thinking Ahead Institute, emphasizes that asset owners are currently navigating a complex landscape marked by market volatility, geopolitical tensions, and evolving technological landscapes. The macroeconomic environment has been characterized by significant fluctuations, with interest rates reaching unprecedented highs in 2023. However, the first half of 2024 has shown signs of stabilization, as central banks began implementing gradual rate cuts after a prolonged period of elevated rates aimed at controlling inflation.

This environment of uncertainty has necessitated a more sophisticated approach to asset management. Asset owners are increasingly required to balance financial returns with regulatory compliance, particularly in light of rising political influence and geopolitical risks. The interplay between these factors has led to a reevaluation of traditional investment strategies, pushing asset owners to adopt innovative solutions that address both financial and sustainability goals.

The Role of Technology and Climate Change

In addition to macroeconomic factors, the rise of technology and the urgent need to address climate change are accelerating changes in the investment landscape. Traditional risk management strategies, which often rely on historical data and linear models, are proving inadequate in the face of today’s complex and interconnected risks. As a result, asset owners are called to develop new frameworks that can effectively manage risks arising from systemic sources with limited historical precedent.