In contrast to the previous two quarters, equities generally produced positive returns in the second quarter of 2001, according to the CAPS pooled pension fund survey.
This trend was reflected in the performance of balanced funds, where the median return for the second quarter was 1%, a 6.1% improvement from the first quarter. The median return for UK equities was 1.2% compared with -9.2% in the first quarter.
The survey found that, on the whole, overseas equities outperformed UK equities, although Europe was the only region to produce negative equity returns. Bond returns were marginally negative, despite falling interest rates.
The results for the 82 balanced funds for the second quarter were as follows:
*1st - J Rothschild (GAM). The £26m balanced fund’s returns were 7.3% compared to 6.1% in the previous quarter. *2nd - Winterthur Life balanced. The £210.5m fund’s returns were 3.4% compared to -6.9% in the previous quarter.*3rd - Orbitex Exempt Balanced. The £5m fund’s returns were 2.8% compared to -6.0% in the previous quarter.
Asset distribution winners as at June 30, 2001:
*UK equities - Glasgow Investment Managers with 68.7%*Overseas equities - J Rothschild (GAM) with 44%*North American equities - Bank of Ireland with 17%*European equities - Sarasin balanced fund with 25.1% *Japanese equities - Sarasin balanced fund with 11.9%*Pacific ex-Japan equities - J Rothschild (GAM) with 13% *Emerging markets - J Rothschild (GAM) with 13%.*Overseas bonds - P&D managed exempt with 14.2%*UK bonds - Prum&G Med.Term Balanced with 51.6%*Index-linked - Northern Trust and JP Morgan Fleming with 3%*Cash - J Rothschild (GAM) with 30%*Property - SLC Asset Management with 7.5%
The UK equity returns for the 76 funds surveyed were as follows:*1st - Equitable High Income. The £294.7m fund increased to 6.3% compared with -3.0% in the first quarter *2nd - Invesco Exempt Trust. The £44.3m fund increased to 4.6% compared with -2.7% in the first quarter.*3rd - Dresdner RCM Exempt. The £52.8m fund increased to 4.5% compared with -7.0% in the first quarter.
Mid cap stocks provided the best returns at 4.4%, while large and small cap stocks both provided smaller, positive returns overall. General industrials was the best performing economic sector, returning 8.1% over the quarter. Information technology struggled for the third consecutive quarter with a return of -19.4%. High yielding equities returned 5.4% over the quarter, while low yielding equities returned –4.6%.
The medians in both active UK bond sections of the survey outperformed their comparative gilt indices over the second quarter. This was partly driven by non-gilts consistently performing better than gilts over each of the last four quarters.
Some 15% of pension funds included explicit non-gilt exposure in their benchmark as at June 30, 2001. This has risen from just 3% in the space of a year.
UK equity weightings remained relatively unchanged over the quarter. At the same time, the average weighting in overseas equities increased from 26% to 27.5%, on the back of good relative returns. The overall bond weighting fell back from 13% to 12.4%.
Over the three years to June 30, 2001, UK and European equities returned 2.2% pa and 2.1% pa respectively. These are the lowest returns generated by any of the sectors over this period. The best performing asset class has been property, returning 11.2% pa.
By Janet Du Chenne
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