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CAPS data show 2001 dire for pooled pension assets

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UK- For the first time since 1973/74 pooled pension funds have suffered their second consecutive year of negative returns according to the latest CAPS pooled pension fund update.

UK equities made up some of the lost ground in the fourth quarter of 2001 but the gains were insufficient to offset earlier losses. The report, which covers 83 asset managers with a combined £199bn in pooled funds, found that half the funds surveyed managed to beat the FTSE All Share return of –13.3% by 0.2 percentage points.

Rather like 2000, 2001 was a year for value rather than growth managers and value stocks returned an average of 2.2% compared with a corresponding –25.8% for growth stocks.

CAP’s survey found a considerable difference in sectoral returns in the UK during 2001. The FTSE 250 was the best performer with a return of –6.7%. Returns from the FTSE 100 (-14.1%) and FTSE small caps (-16.9%) were below the All-Share’s corresponding figure of –13.3%.

Basic Industry continues to outperform its TMT counterparts and was one of the few sectors to register positive returns, in this case 7.2%. IT reported another dismal year losing, on average, 66%.

The survey found that overseas equity proved a disappointing investment with a median return of –16.8%, 2.7 points lower than the FTSE 100 return. Presenting the findings, Alan Wilcock, head of research and development, says this was partly due to funds favouring European equities over better-performing North American equities.

Increased risk and lower returns are also a sign of the times according to the survey. For the five years ending December 2001, returns on UK and overseas equities were 7.3% and 9.4% respectively. Five years ago and the corresponding figures were 16.1% and 12.1% per annum. Pairing this fall in performance is a marked increase in volatility which has almost doubled in the last three years.

In addition, many actively managed UK equity and balanced funds have seen their tracking errors increase significantly over the last five years.

Fixed income and property investments have bucked the trend and produced higher returns at lower levels of risk. During 2001, fixed income weightings in balanced funds rose 1.1 percentage points to 13.6%, a figure that remains below the 1998 peak of 15.6%. Cash holdings fell from 6.6% and property allocations remained relatively stagnant at around 1.1%.


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