UK - The continued shift away from UK equities by pension funds and the strength of bond investment are highlighted in WM Company's second quarter figures.
The figures to the end of June show that while UK equities still dominate with 46.4% of the asset allocation, overseas equities now make up 23.9% with UK bonds comprising 10.6% of the WM All Funds. This compares to 46.9% for UK equities, 23.3% for overseas equities and 10.6% for UK bonds at the end of the first quarter.
WM Company head of research and consultancy Eric Lambert said: “The split is moving away from UK equities to international equities. But there has been falling equity exposure any way. This [falling exposure] was prior to the markets dipping, which has exacerbated it.”
The figures also show that in October equities have shown some recovery from the September 11 crisis, but not enough to cover the drop over the whole year.
While September saw a drop of about 10% for UK equities, they have bounced back to show growth of 3.2%.
Lambert said: “Pension funds have in no way recovered what they lost. It is better news, but they are still down over a 12 month period.”
Over the 12 months since October 2000, UK equities have dropped by 19.6%. Overseas equities fell by 25.1%, although they recovered 4.4% in October.
Lambert believes that this recovery is only a response to how badly equities performed after September 11.
He added: “Equities have recovered significantly since the end of September. But the year to date has not been just about September and there has been some modest recovery, but it has been a poor year.”
Over the year, pension funds which switched into bonds from equities have seen the fruits of their actions.
Lambert said: “What has been lucky is that funds who had reduced their equity exposure in favour of bonds have done very well. Bonds have certainly performed better than equities over the last couple of years.”
By Paul Sanderson
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