UK - Deutsche Bank-owned consultancy the WM Company calls the situation “severe” as UK pension funds post a negative return of almost 13% in the three months to the end of September 2002.
The firm said in a news release that, according to its initial estimates, the three months to the end of 30 September saw UK funds post a negative return of almost 13%. The figure for the first nine months of the year saw a negative return of 17%, it added.
WM’s executive director Eric Lambert says: “These results are severe and pose a number of problems for asset managers, trustees and fund owners. However, it is important to put these figures into context. Many asset managers are saying that the equity markets as a whole now represent fair value and that it is possible to buy good companies at reasonable prices.”
Calling property the “forgotten asset”, Lambert added that it has returned ”about 6%” in the first nine months of the year.
WM said funds’ exposure to equities now stands at 62% - down from 80% in 1993. Says Lambert: “These figures show the financial risks to sponsoring employers continuing to offer a defined benefits scheme.” He added that employees are now realising the value of defined benefits schemes – although the current environment is “bleak” for people retiring from a defined contribution scheme. “They face the double whammy of having a fund that will have shrunk by about 11% in the last year and having to buy expensive annuities on low gilt yields.”