Investment returns from UK local authority pension funds stooped to a -6.3% average in the year ending March 2001, according to performance measurers WM Company.
The figure ranks poorly against the 1999/2000 return of +13.6%. All six equity classes posted negative numbers, reflecting recent global market volatility.
The worst performer was overseas equities, posting -17.1%, compared with +38.4% last year. Japanese equities took the biggest battering, returning -30.5%, against a 1999/2000 return of 75.6%. The asset class was also the biggest loser in terms of strategic allocation, from 4.7% to 3.4% of total asset mixes.
The slump in Japanese equity returns was closely followed by Pacific (ex-Japan), returning -13%; North America posting -13%; and European returns at -11.2%. North America was the only region in which interest rose, according to WM - strategic allocations were up 0.6% to 4.4% of the average total fund portfolio.
Outside of bonds, property and cash, UK equities were the best of a bad lot last year, returning -8.8%. The class also remained the most favourable overall despite being down marginally at 49.7% from last year's 50.6% in terms of asset mix.
Conservative investments all posted positive returns, according to WM. Overseas bonds posted this year's best return at 15.7%, up 17.2% on the 1999/2000 figure. UK bonds, index-linked and cash asset classes also saw increases in terms of asset mix percentage, as did alternative investments. Property investment was the highest flyer, up by 0.6% to 5.2% of total portfolios.
Steven Taylor, head of pensions investments at the UK's Greater Manchester Pension Fund, said: Overall local authority returns were clearly disappointing at -6.3% for the last year and are likely to impact significantly on the important three year actuarial valuations which are currently being undertaken.
The figures, and the prospect of low overall returns going forward, underscore the need to have active managers who can significantly outperform the average if employer contribution rates are to be kept at affordable levels and council service provision is to be maintained.
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