UK - Balanced funds registered a -12.6% median return during the third quarter of 2001, the worst result on record since the -15.2% return for Q3 in 1990, according to the latest CAPS pooled pension fund survey.
The fall in balanced fund returns reflected the dramatic decline in equities world-wide during Q3, with the FTSE All-Share index posting a -13.5% return. Within this, large cap stocks provided the best returns at -12.4%, while medium and small cap stocks showed poorer returns of -18.1% and -25.4% respectively.
The survey found that overall, UK equities were the best performers in the asset class. Bonds provided some respite from negative equities returns, along with cash and property. For the sixth quarter in succession, value stocks outperformed their growth counterparts. Over the last 12 months, the corresponding returns were +2.6% and -37.7%.
The results of the 94 balanced funds surveyed during the third quarter are as follows:
* 1st - Prudential M&G Med.Term Balanced. The fund posted a -5.4% return, compared with a -0.5% result in the second quarter. The third quarter return represents a massive improvement for the fund on its second quarter performance, when it was ranked 80th.
* 2nd - J Rothschild (GAM). The £42m fund posted a -9.1% return for the quarter, compared to its 7.3% return in the previous quarter. For the year to date, the fund is the best performer with a 3.4% rate of return.
* 3rd - Orbitex Exempt Balanced. The £5.1m fund retains its third place in the performance tables, with a -9.3% return for the quarter. For the previous quarter, the fund posted a 2.8% return.
The UK equity returns for the 80 funds surveyed are as follows:
* 1st - Liontrust Prime Exempt. The £14.2m fund posted a -9.3% return for the third quarter, moving it up from fourth place in the rankings. For the previous quarter, the fund had a 4.2% rate of return.
* 2nd - Martin Currie UK Growth. The £22.4m fund returned -9.6% to lift it to second in the performance table. This compares to the 3.1% return it posted in the previous quarter, put it in tenth place.
* 3rd - Liontrust Exempt. The £129m fund moves up to third, up from the 30th place that it registered in the second quarter. The fund posted a -9.7% return for the quarter, compared to a 1.9% return previously.
During the third quarter, UK equities outperformed global equities, posting returns of -13.7% and -15.7% respectively. North American and Japanese equities also fared badly, with returns of -19.9% and -21.5%. As expected, the average equity weighting in balanced funds fell on the back of poor returns. UK equity weightings fell from 53.1% to 52.1%, whilst overseas equities fell back from 27.5% to 25.3%. North American equities was the only equity sector not to fall at 6.7%. The overall bond weighting increased from 12.4% to 14.3%
Additionally, the CAPS data revealed that the recent run of negative equity returns is now beginning to show in the longer-term figures. Over the three years to September 30, 2001, the median balanced fund earned just 2.6% pa, barely outstripping price inflation of around 2.2% pa. Over the same period, UK and European Equities returned 2.4% pa and 1.9% pa respectively. For the five years ending on September 30, 2001, the median balanced fund return was 5.0% pa, just above wage inflation of around 4.5% pa. Over the same period, UK equities (6.5% pa) and overseas equities (5.8% pa) were outperformed by UK Gilts, conventional (9.0% pa) and index-linked (8.3% pa), and property (12.5% pa).
By Geoffrey Ho
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