UK pension funds ended 1999 with an average return of 20%, according to Edinburgh-based consultancy firm WM Company
“The industry had another surprising year, well ahead of market practitioners’ expectations at the start of the year,” says Peter Warrington, WM executive director.
This high return came as a result of the growth in the world equity market, especially during the last weeks of the year, with Japan rising by over 80% and the Pacific ex-Japan approaching 50%.
The returns for UK equities were 24%, with huge variations between sectors. According to WM Company, IT stocks doubled their value during 1999, while utilities and some consumer sectors fell by 15%. Euro-zone equities had a return of 20% and remain as the main international area of investment for the majority of UK’s funds, despite the fact that the US market produced the strongest returns of the major equity markets with almost 25% return.
“Pension funds can take a more sanguine view of short term fluctuations and there is certainly no evidence that the lost faith in European investments,” says Warrington.
In terms of asset allocation, the proportion of funds moving from bonds to equity investments increased during the year as the bond market performed well below equities.
These results were the second highest of the last decade and leave the 1990s with an average return of almost 13%.