Balanced portfolios with high exposure to bonds fared better over 2002 as equities suffered
Pooled balanced pension funds fell on average 18.1% over 2002, the largest calendar year decline since 1974, according to the Russell/Mellon CAPS survey.
The fall was driven by poor global equity market performance, with those funds more heavily exposed to fixed interest faring better.
Despite the continuing poor equity market performance, there has not been a significant exodus from equities by pension portfolios. The equity weighting in balanced pooled pension funds fell only slightly, to 78.5% from 80.3% over the course of last year. At the same time fixed income weightings rose from 13.6% to 15.3%.
Holdings in other sectors remained fairly static over 2002, according to the survey. Cash weightings rose by 0.2% to 4.9% while property fell by 0.1% to 1%.
The top-performing fund over the past 12 months has been the Prudential M&G Medium Term Balanced Portfolio, which fell by just 6.3% compared to the sector average return of -18.1%. The fund was extremely underweight UK equities at just 31% compared to the average weighting of 52% and had almost half of the portfolio in UK bonds, with a weighting of 48.8% compared to an average weighting of 10.3%.
The £6.1m Neptune Balanced fund was ranked second over 2002, falling 9.7% over the 12 month period. The fund was a fairly consistent top performer over the 12 months, ranking in the top five for the first three quarters before performance fell off in the last quarter. Over that three month period the Neptune portfolio dropped 0.3% to rank 79 in a field of 87 funds.
Throughout much of the year the fund had benefited from high weightings in cash and overseas bonds while being relatively light in overseas equities. Neptune Balanced had a 62.6% weighting to UK equities, higher than the average fund which had just over 50% exposure to domestic equities.
It was underweight North American, Japan, European and overseas equities as well as property and UK bonds.
The portfolio was overweight cash at 9%, compared to the average 4.9%, and emerging market equities.
The best performing balanced vehicle over three years, the MIR Balanced Exempt fund, had the highest weighting of all funds in cash over 2002 at 15.5%.
The worst performing balanced pooled pension fund over 2002 was Glasgow Investment Managers with a negative return of 28.5%. The portfolio was bottom of the sector over the first three quarters but recovered in the fourth quarter to rank fifth. Its performance for much of the year was a result of its overweight position in UK, Japan, emerging markets, Pacific ex Japan and European equities.
At the same time the fund was positioned underweight in the more defensive property, cash, index-linked, overseas bonds and UK bonds.
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