Index offers ‘poor risk diversification'
UK - Pension funds which invest in stock market indices are making higher risk investments than many realise, ratings agency Standard & Poor's claims.
It says the FTSE Index offers poor risk diversification with the top 15 stocks accounting for some 63% of the market. The index is heavily weighted towards banks, pharmaceuticals, oil and telecoms companies.
S&P’s found that for the year to June, the top 15 stocks offered a lower price/earnings ratio than that of the average for the FTSE All-Share Index.
Tracker funds which invested in the FTSE100 fell by 15.2% over the year to the end of June, while those that tracked the FTSE All-Share only fell by 11.7%.
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