Inv perp uk core needs 14.24%pa growth over five years to return to March 2000 level
Investors that put money in at the top of the UK bull market could be waiting more than five years to recover their initial investment as leading fund managers predict slow growth moving forward.
Those who invested in UK All Companies funds two years ago are sitting on losses greater than 30%, on average. Between 17 July 2000 and 15 July 2002, funds in the UK All Companies sector on average fell by 31.84%, on an offer to bid basis, according to Standard & Poor's.
To restore investors' capital to its original level, funds would have to rise by 46.71% on average over one year. To restore initial investments, annualised average growth of 13.63% would be required over three years, 10.06% over four years, 7.97% over five years or 6.6% over six years. This compares with the 49.19% the FTSE 100 would have to jump in one year to recover its losses.
Those who invested three years ago have suffered less, benefiting from the strong growth of 1999. Over three years to 15 July, UK All Companies funds posted losses of 26.36% on average, offer to bid.
According to Standard & Poor's, investors who went into ABN Amro UK Growth on 1 March 2000 would need the fund to post growth of 85.22% to restore capital in one year. This equates to annualised growth of 22.81% over three years or 13.12% over five. The fund has actually averaged 0.67% annualised growth over the three years to 16 July.
Investors in Invesco Perpetual UK Core and Gartmore UK Growth have fared even worse, requiring 94.55% and 89.43% respectively to return losses over one year. This breaks down as 24.84% and 23.73% annualised growth respectively to return capital in three years or 14.24% and 13.63% over five years.
Invesco-Perpetual UK Core has actually averaged -15.62% per annum over three years, while Gartmore UK Growth has averaged -15.6% over the same period.
Adam Seitchik, chief global strategist at Deutsche Asset Management, believes the bear market is now over but anticipates annualised growth rates of 7%-8% over the next five years.
Edward Bonham Carter, chief investment officer at Jupiter, anticipates the FTSE All-Share posting annualised growth of between 5%-7% on a five-year view, while Andrew Milligan, head of global strategy at Standard Life Investments, predicts similar annualised growth rates of 5%-10% over the same timeframe.
Bonham Carter said: 'Within that, there will be large discrepancies between different stocks and sectors, so active fund managers will have to earn their fees.'
Given that consensus predictions from leading fund managers and strategists point to lower levels of growth over the next five years than were enjoyed in the 1980s and 1990s, investors may have to wait the full term or longer to get their money back.
The US markets peaked in March 2000 and the same month saw record breaking inflows of £10.83bn into Isas, £3.577bn of which went into UK All Companies funds.
Seitchik noted even if the FTSE posted annualised growth of 10% over the next five years, it would still only reach 6,696, some 3.4% off its 12 December 1999 high of 6,930.
Investors in beleaguered Nasdaq equities will need even more patience to undo the past two-and-a-half years' losses.
Seitchik said: 'It is going to take a long time to get back to where we were. The Nasdaq is down 75% from its high and, over the next five years, it could have 13% returns and still only reach half its peak value.'
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