UK / US - Pension schemes run by FTSE -100 companies have reportedly been left reeling after last week's four-day rout in stock and bond markets, according to Hewitt Associates.
The firm said market movement during the period brought the aggregate surplus of schemes down to £15.3bn by the close of trading on 27 July, compared to £31.5bn on 23 July.
This meant half the accumulated surplus built up since the market dip of 2003 was eliminated.
Hewitt said the surplus for FTSE -100 companies peaked at £39bn on 13 July, influenced by rising interest rates and strong stock markets.
It added that about two-thirds of the £15.3bn fall in surplus reflected plunging equities, while the remainder was down to a drop in gilt yields.
Commenting on the seriousness of the issue, Jane Beverley, senior technical consultant at Punter Southall & Co, said the dip reminded investors that it is always difficult to predict the markets.
She added that it was important to view the situation in context and realise new mortality projections may mean schemes might never have been in surplus at all.
From a US perspective, Sherry Reser, media relations manager for the California State Teachers’ Retirement System (CalSTRS) said it was being watchful and keeping the US stock portfolio within the middle of its target range of the asset allocation.
Prior to June, Reser said the fund was at the top of that target range.
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