UK pension funds – up an “unspectactular” 1.1% in the second quarter of 2004 – are currently marking time, says performance measurement firm WM Co.
“The average UK pension fund grew steadily if unspectacularly, at a rate of 1.1% for the quarter,” WM says. “Equity performance drove the overall gain for the quarter, with UK equities up 2%.”
North American equities were up nearly 3% and European equities almost 4%. Asia Pacific equities were down, but this was largely a function of currency weakness relative to sterling.”
“In current market conditions it is proving difficult to find sources of incremental return,“ says Graham Wood, a senior consultant at the firm. “Pension funds continue to mark time as they wait for global markets to demonstrate a clear sense of direction.”
Bond returns declined as market expectations of interest rate rises increased, WM says. “UK bonds were hit the hardest, down over one percent for the quarter, but non-UK bonds and UK index-linked gilts also suffered small declines.”
Real estate was up almost 5% – “the best performing asset class in the quarter”. WM says: “The investment pattern for the quarter continued to indicate money released from equities – around £2.3bn (e3.4bn) for funds in the survey – and directed toward bonds, both conventional and index-linked.
“Benefit payments exceeded contributions and investment income, leading to net disinvestment from funds in aggregate.”