UK - Balanced pooled funds achieved a positive median return in Q3 of 8% net of fees, representing the tenth consecutive quarter of positive returns.
According to Mellon’s pooled pension fund database, positive market returns were achieved across all major asset classes in Q3. UK equities achieved an index return of 8.2%, while overseas equities returned 9.2% overall. Property (4.6%) and UK index-linked gilts (1.3%) were the only other sectors to outperform the cash index of 1.1%.
Mellon Analytical Solutions publications and statistics manager Daniel Hall attributed this growth to another strong all round performance in global equity markets.
“Balanced pooled funds have finally broken even over cumulative periods from the start of the decade,” he said. “The median return over 5 years, from the start of 2000 to the end of September 2005 was 1% per annum.”
However active pooled managers underperformed relative to the index in property and a number of major equity markets - UK smaller companies, UK Equity, North American equity and Japanese equity. They did, however, match or beat the index in all other sections.
Active UK Equity managers achieved a median return of 7.9% after fees this quarter - 0.3% below the FTSE All-Share index. They were also below the index over one, three, five and 10 years to 30 September 2005.
Balanced pooled fund managers moved money out of UK Equities during Q3 2005 and consequently average weightings in this sector fell by 0.7%, from 50.6% to 49.9%. This represented a new low for average UK Equity weightings and the first time since Mellon’s survey began at the end of 1989, that balanced funds have held less than half of their assets in UK Equities.
Over the same period, managers moved money into overseas equities, with Japan, North America and Europe the most popular destinations. These manager movements combined with strong relative performance to increase overall overseas equity weightings by 1.9%, from 33.2% to 35.1%. This represented another new high for average Overseas Equity weightings.
Poor relative performance impacted on UK and overseas bond weightings over the quarter. UK bonds fell by 0.4% from 6.7% to 6.3%, while overseas bonds fell by 0.6% from 2.4% to 1.8%. For overseas bonds, manager movements also contributed to this reduction.
This week's edition of Professional Pensions is out now.
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