US - Equity returns have lagged well behind the expectations of investment managers, according to a report on US institutional portfolios by Mercer Investment Consulting.
Based on Mercer’s Fearless Forecast, hopes for returns of 7.3% for the year in large cap equities were dashed as the asset class returned only 2.8% on a year-to-date basis.
The small cap asset class, as represented by the Russell 2000 index, posted a gain of 3.4% for the first three quarters of the year, against a forecast of 7.4%.
According to Mercer’s Summary Performance of US Institutional Portfolios survey, the median corporate plan had a third quarter gain of 3.9%, while the public plan gained 4.2%.
Within the international equity asset class, the growth style benchmark underperformed value by 80 basis points, yet the median growth manager outperformed their value counterparts by 150 basis points. Based on Mercer’s Fearless Forecast, international equities are expected to earn 7.8% for 2005, yet the asset class exceeded expectations by posting a year-to-date return of 9.5%.
In addtion the core fixed income class faired poorly with returns of only 1.8% after the fearless forecast stipulated a return of 2.7%.
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.