UK - Pension schemes are set to produce their first year of positive returns since the bear market started, estimates from the WM Company show.
The performance measurement firm says schemes will return an average of 16.8% for last year – the first positive result since 1999.
It said schemes’ investment performance recovered last year due to the combination of better economic news and the removal of some of the geopolitical uncertainty.
The WM Company found that UK equities returned 21.2% during 2003, Japanese equities 20.1%, while European equities returned 28.4%.
North American equity returns, though, were hampered by the 10.1% fall in the value of the US dollar, which lowered returns to 16.2%.
At the same time, the WM Company said that schemes’ property investments had “a solid year” returning 9.9%. But fixed income returns were far lower with UK and overseas bonds returning 3.6%, while the UK Index Linked bonds delivered 6.7%.
WM consultant Graham Wood (pictured) said: “There is no doubt that 2003 will have offered schemes some welcome relief from the gloom that has enveloped them in recent years. Many will have had their funding positions improved as a result of the returns available.”
The firm also found that during 2003 schemes reduced allocation to domestic equities in preference of UK bonds and North American equities.The WM Company said the move was a reflection of both the greater internationalisation of equity investment and the importance of North America within the global market.
Additionally, the WM Company found that schemes sold overseas bonds during 2003. The firm explained that the asset class was being removed from customised benchmarks as it lacked liability matching characteristics.
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