UK - The average UK pension fund produced an estimated weighted 14% average return on investments in 2009, compared with -13.8% return the previous year, according to figures from BNY Mellon Asset Servicing.

The analysis, representing the total performance of the pension scheme assets from a sample, suggested UK pension funds produced an estimated real return of 14.9% against the Retail Price Index (RPI) for 2009 and an estimated 12.8% against the National Average Earnings Index.

BNY Mellon said all the key equity markets produced positive returns over the year with the sole exception of Japanese equities which returned -5.9%. This is in contrast to data published by MSCI Barra yesterday, which reported the Japan equity index generated a return of 5.67%. However, the recorded difference reflects the impact of exchange rates as this MSCI data is listed in US dollars and the FTSE-AW Japan, used in BNY Mellon's research, is linked to the performance of sterling. (See earlier IPE article - Equities recover but still deliver ‘worst decade' performance - where MSCI Barra returns are calculated in euros)

The strongest returns meanwhile came from emerging market equities as they returned 58.9% over the year, closely followed by Pacific (ex Japan) equities, which produced 50.7%. UK equities also performed well with a return of 30.1% although the results from bond investments were less positive.

UK bonds returned -1.2% in 2009, while overseas bonds fared worse and returned -9.7%. This was slightly offset by the performance of index-linked gilts which returned 6.4%, but property investments also struggled, producing a return of -5.6%.

Despite the poor bond performance, BNY Mellon noted the average 14% total return was the highest result it had recorded since 2005, with pension funds also reporting an estimated average return of 1.7% over a three-year period.

In addition, data analysis suggested UK pension schemes have achieved an estimated weighted average return of 6.4% over a five-year period and an estimated return of 3.23% over the 10 years to 31 December 2009. This beat the RPI by 0.6% a year over the decade, but underperformed the National Average Earnings Index by 0.5%.

Alan Wilcock, performance and risk analytics manager at BNY Mellon Asset Servicing, said: "Following the worst annual return for over 30 years in 2008, pension funds clawed back most of those losses by the end of 2009, despite the poor start to the year."

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