As a result of a marked 12.3 per cent year-on-year increase from 2022, recovering the losses from the previous year, the world’s largest 100 asset owners (the ‘AO100’) now hold a record USD26.3 trillion.

The full Asset Owner 100 study also reveals the evolving split between different types of asset owner. Sovereign Wealth Funds (SWFs) remain a dominant force among other types of asset owners, now managing 38.9 per cent of the assets among the AO100, or nearly two-fifths. In comparison, pension funds, while still forming the largest assets under management by fund type (51.2 per cent), saw the smallest growth rate, with assets held rising by 8.9 per cent from the previous year.

Pension funds have represented a declining proportion of the AO100 in North America and Europe, Middle East and Africa (EMEA) since 2017, falling in favour of Outsourced CIOs and SWFs’ accelerated growth. Across Europe, Middle East and Africa (EMEA) the pattern is more pronounced as SWFs now form 70 per cent of total assets in the region. In comparison, SWFs manage 43 per cent of assets in APAC, and 2 per cent in North America.

The Government Pension Investment Fund of Japan remains the largest single asset owner in the world, with an AUM of USD1.59 trillion alone. The top three also includes the two largest sovereign wealth funds. Norway’s Norges Bank Investment Management in second place with AUM of USD1.55 trillion while China Investment Corporation is now third globally with USD1.24 trillion.

EMEA is the largest region in the AO100 study, accounting for 34.3 per cent of total AUM, closely followed by Asia-Pacific with 33.0 per cent of total AUM. North America represents 32.7 per cent of total AUM.

Jessica Gao, director at the Thinking Ahead Institute, says: “Asset owners globally are navigating a series of waves and occasional storms – from market volatility and geopolitics to technology and structural changes in societies and economies.

“Macro trends matter. Over the last 12 months, the global investment macro environment has been marked by volatility and mixed performance across asset classes. Interest rates reached significant highs in 2023. The first half of 2024 brought some stabilisation in global markets, as base rates remained relatively flat. After a sustained period of elevated rates aimed at controlling inflation, central banks began to implement gradual rate cuts in the latter half of 2024, marking the first reductions in years. However, market volatility remains high with uncertainty due to geopolitical events and several major elections.

“Meanwhile, the rise of political influence amid the increase in geopolitical risks, major elections, and use of monetary policy to tackle inflation has necessitated asset owners to take a more sophisticated approach in managing the intersections between financial return and regulatory compliance. During this period of volatility, leading asset owners strived to balance political influence and achieve positive sustainability impacts, while operating in macroeconomic environments of high uncertainty.

“Technology and more fundamental change – including to the global climate – are accelerating factors too. Traditional risk management relying heavily on historical data and linear models struggles to keep up with today’s complex, interconnected risks. A new approach will be required to understand and manage risks that arise from complex, systemic sources with limited historical precedent.”

The firm writes that with rising geopolitical uncertainty, technological opportunities, and a challenging market environment, asset owners are increasingly focused on resilience, impact, and private market opportunities.

Asset owner performance

Only 62 per cent of investors say that their institutions’ investment performance met or exceeded long-term return objectives through the turbulence of 2022-2023. In 2024, however, there’s a slightly more optimistic tone, bfinance writes, with the figure estimated to be 88 per cent. While managers in private market asset classes (private debt, infrastructure and private equity) still demonstrated the strongest satisfaction ratings in 2024, satisfaction was significantly lower than in 2022. Investors relayed high satisfaction with active fixed income manager performance, with 83 per cent in investment grade bonds, but only 35 per cent of investors were satisfied with real estate managers – a huge decline compared to 2022.

Investment portfolios

Private markets remain central to investment strategies, with 53 per cent of investors planning to increase exposure over the next 18 months. Infrastructure and private debt are leading areas of interest, capturing 36 per cent and 35 per cent of new allocations, respectively. Notably, interest in secondaries is growing, with 37 per cent of investors boosting exposure as they seek liquidity options within illiquid asset classes. However, satisfaction with private equity managers has dropped significantly from 94 per cent in 2022 to 69 per cent in 2024, suggesting increased scrutiny of GPs.

In private markets, nearly half (47 per cent) of investors expect a reduced ‘illiquidity premium’, expecting this to be lower in 2020-2040 than it was in 2000-2020. Meanwhile, 37 per cent are in the process of boosting exposure to secondaries and more than a quarter of those are new entrants to the space, among other strategic changes.

Equity portfolio diversification is a clear priority, as only 34 per cent of investors expect the largest tech stocks to outperform broader indices in the coming year. Additionally, 34 per cent of investors anticipate more diversification in their equity portfolio in the next one-to-two years across one or more of four lenses: style (22 per cent), size (16 per cent), geography (16 per cent) and stock-level (14 per cent).

Fixed income strategies are gaining momentum, particularly investment-grade bonds, with 22 per cent of investors boosting allocations, bfinance writes. In real estate, 62 per cent of investors anticipate a moderate (59 per cent) or substantial (3 per cent) recovery in core real estate over the coming 12 months, following severe dislocation. However, investors’ predictions for property market recovery have no relationship with their asset allocations movements over the next 18 months. Meanwhile, emerging market exposures are declining, with 18 per cent cutting emerging market equities and 11 per cent reducing allocations to emerging market fixed income.

Opportunities and trends

Artificial intelligence continues to present compelling thematic opportunities, with 40 per cent of investors viewing it as a strong investment theme. However, caution prevails, with a predicted market rotation away from large tech stocks, bfinance writes. This reflects a growing focus on mitigating tech-related concentration risks through diversified equity strategies and broader AI investments.

Adoption of digital assets and cryptocurrencies remains low, with only 9 per cent investing in them. In 2022 the figure was 8 per cent, and 21 per cent expected, at that time, to have exposure within five years.

Finally, although interest in impact investing is growing, adoption remains gradual. Currently, 27 per cent of investors are engaged in impact strategies, with a further 26 per cent planning to enter this space. 24 per cent of investors will increase exposure to impact strategies. Climate transition remains a significant theme, with 40 per cent of respondents identifying it as a strong investment opportunity. Biodiversity-focused assets are poised for growth, with a projected 200 per cent increase as investors explore nature-based solutions.

Risk management

With 75 per cent of investors emphasising the need to build portfolio resilience, managing risk has become a primary objective. Major areas of concern include geopolitical unrest (54 per cent), prolonged downturns in risk assets (23 per cent), and liquidity risks (19 per cent). Investors are taking diverse approaches, with 22 per cent already using equity overlays and another 9 per cent planning to implement them to buffer against potential equity market corrections.

While investors are more positive on ‘risk assets’ (e.g. equities) than they were in 2022, there is a huge contrast between different institution types: only 4 per cent of DB Pension Funds are underweight risk assets, in contrast with 37 per cent of Insurers. Furthermore, investors are expecting ‘higher for longer’ rates compared to the current economist consensus: the average prediction for the Fed Funds rate at end-2025 is 3.4 per cent, distinctly higher than the 3.0-3.25 per cent figure in an October 2024 Reuters economist poll.

Kathryn Saklatvala, Head of Investment Content at bfinance, says: “The report reveals that in an increasingly uncertain world, resilience has taken centre stage for institutional investors. The focus on managing risks like geopolitical unrest, liquidity challenges, and prolonged market downturns underscores the critical need for robust strategies. From equity overlays to private markets and fixed income, we’re seeing investors actively recalibrate portfolios to navigate these challenges, balancing caution with the pursuit of opportunity in areas such as impact investing, infrastructure, and emerging technologies like AI.”