UK - Billions of pounds have been wiped off the value of UK pension fund assets over the last year, according to the latest figures released by the WM Company.
The performance measurement firm said the figures highlighted a massive decline in the performance of equities.
UK equities – which have a collective pension fund weighting of 46.4% – returned -2.3% for the quarter and were down 17.3% for the year ending August 2001.
Overseas equities fare even worse – down 5.2% for the quarter and down 25.4% for the year.
WM Company executive director Karen Thrumble said: “What we can see is that it has been a very sick period for UK pension funds. UK equities are down almost 20% and overseas equities have had a quarter of their value wiped off.”
Thrumble argued the decline in equities was due to pension funds increasing their exposure in fixed interest such as in UK bonds and index linked.
She said UK pension funds were opting for fixed interest because more and more schemes were maturing and had to reduce their high exposure in equities in favour of the less volatile UK bond market.
The figures showed that fixed interest performed strongly with UK bonds returning 1.5% for the quarter - up 7.2% for the year ending August 2001 while index linked returned 1.9%for the quarter and 3% for the year.
Property also performed well returning 0.5% for the quarter and 7.8% for the year.
Thrumble said: “The property sector is almost negatively correlated to the equity market so when equity markets perform badly property will do well and when equities perform well property will do badly.”
Thrumble argued that the disappointing returns for equities was merely a blip and urged UK pensions funds to remain upbeat.
She said: “This is one year in isolation and over the longer term equity returns are still very strong. Last year we saw a massive upsurge in dotcom and technology stocks and now we are seeing their decline, the market is simply reverting to its average mean.”
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