Total assets at the world's largest 300 pension funds grew by 27% to $8.4 trillion during 2004, driven largely by growth in Japan and Asia, according to Watson Wyatt research. All developed countries experienced asset growth due to general recovery in capital markets, but the Asia Pacific witnessed dramatic growth in market share of pension assets.

Of the pension funds that gained the most assets in 2004 around the world, the top three are Japanese: the Government Pension Investment Fund, with assets leaping from $419 billion to over $1 trillion, or by 153%; the Pension Fund Association, with assets rising from $47 billion to $116 billion, or by 147%; and the National Pension Association, which saw assets rise from $10 billion to $22 billion, or by 118%.

Overall, Japan's share of the global pensions market in asset size rose from 13.5% in 2003 to 21.0% in 2004.

This reflects the shift completed last year in which Japanese corporate pension funds shifted roughly 25% of their total assets to the GPIF, as the government took responsibility for a portion of corporate pension liabilities (a process called daiko henjyo); PFA assets grew as a result of assuming responsibility to those corporate schemes that were closed altogether.

In addition, state pension funds in South Korea and Taiwan gained enough size for the first time to give these countries more than 1% of the global market share in pension assets, with each one sporting a pension fund big enough to be included among the world's top 20: Korea's $134 billion National Pension Corporation is ranked sixth and Taiwan's $110 billion Chunghwa Post is ranked tenth.

The GPIF of Japan is the world's biggest pension fund, while its $164 billion Local Government Officials Pension Fund is fourth, the PFA is seventh, the $96 billion National Public Service fund is thirteenth and the $76 billion Public Schools Employees fund is nineteenth.

The Netherland's ABP is the second-largest at $231 billion and America's California Public Employees Retirement System is third at $168 billion. America's share of pension assets has declined markedly, from 52.6% of global assets in 2003 to 44.7% in 2004, although this is partly reflected by a declining US dollar; in local currency terms, growth in non-US pension funds was less dramatic but still noted: in Japan's case, its pension assets grew by 53.9% in US dollar terms and by 48.1% in yen terms.

"This shows that Asia's pension assets are growing faster because of the growing institutionalization of both public and private savings," says Peter Ryan-Kane, principal investment consultant at Watson Wyatt in Hong Kong.

Watson Wyatt conducted its research in conjunction with US-based magazine Pensions & Investments.