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WM Co. says UK funds returned 17% in 2003

UK - WM Co. says UK segregated pension funds returned 17% on a weighted average basis in 2003 - but admits that there will be a limited impact on deficits.

The WM figures compare to Russell/Mellon CAPS, which said yesterday that funds returned 16% on a weighted average basis last year.

"The year's poor start turned out to be the tail of the bear market," said Graham Wood, WM’s executive director of consulting. "After March, UK pension fund returns rose to gain 17% for the year. This is the first positive performance for Pension Fund returns since 1999."

"With these returns, trustees will be feeling happier."

But he said there would be a "very very limited" number of funds which would move into surplus as a result of the returns. "I think we've got to start getting used to a lower return environment," he said in an interview.

And he said that while returns were up, fund liabilities were also "likely to have increased" due to rising longevity.

WM, part of State Street, said that funds' total equity exposure increased over the year "driven by the high equity returns in comparison to bond performance".

And it added that they took the opportunity of UK equity strength to switch money into UK bonds. They also shifted money away from the UK towards North American stocks.

Funds’ allocation to UK equities has fallen to 39.2% from 39.4% a year ago, and is down from 54.4% in 1994, WM data show. Overseas equities share has risen to 27.9% from 25% in 2002 and 22.3% in 1994.

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