Four out of five pension funds in the CAPS pooled pension survey increased their North American Equi...
Four out of five pension funds in the CAPS pooled pension survey increased their North American Equity holdings over the third quarter. This is the highest allocation to this sector since 1993.
North American weightings rose from 4.9% to 5.7% over the quarter, while the average weighting in UK equities increased from 52.9% to 54.4%. Overall overseas equity weightings declined from 27.7% to 26.7%.
The shift helped pension funds capitalise on North American equities' record of providing some of the best returns for the first nine months of the year. Their median return of 11.2% was well ahead of the constructed index, made up of three North American indices. This returned 9.0%, well above the returns from European funds which have not fared as well due to the weakening euro.
UK small-cap stocks outperformed the out-of-favour large caps during the quarter. Over the past nine months they have now achieved an index return of 12.6%, in contrast to the FTSE 100, which fell by -7.5%.
Funds performed well in both the UK Standard and Smaller Companies sectors of the survey over the last quarter.
In the UK Equity Standard sector the median return of 1.3% compared favourably with the FTSE All-Share return of 0.6%. Similarly, the Smaller Companies median was 5.2%, against the index return of 2.5%. This outperformance relative to indices was also mirrored in the results for the first nine months of the year. In the Standard section, the median return of -3.9% beat the index return of -4.9%.
Alan Wilcock, research and development director at CAPS, said this was a welcome result for active managers, following poor results during 1999, when the median returned 22.9% and the index some 24.2%. However, the Smaller Companies median for the first nine months was 11.0% compared with the index return of 12.6%.
European asset allocation declined from 13.9% to 12.6% partly due to the weakening of the euro over the quarter, but also as a result of managers moving money to other regions.
Managers with European exposure have not fared as well due to the weakening euro but were ahead of the index with a median of 3.3%, compared with the index of -0.4%.
Results for the Far East ex-Japan, Japan and emerging market funds, were all negative over the first three quarters. The medians were -9.6%, -11.9% and -10.1% respectively.
ABN Amro UK Growth was the best performing UK equity fund in the CAPS Standard peer group. The fund returned 20.6% in the year to date compared with the average, while Legal & General Concentrated UK Equity was near the bottom of the 68 funds with returns of -9.2% year to date.
ABN Amro's fund has been a consistent top performer in the UK equity sector, ranking first over the last 12 months, the last three years and over 10 years with annualised returns of 80.1%, 40.2% and 26.2% respectively. The fund ranked second over five years, where it lost out to Jupiter Global (excluding UK General) which returned 29.6% annually over the period compared with ABN Amro's 29.5%.
Other top-ranking funds over the year to 30 September included Cazenove Concentrates and Invesco UK Core, which both returned 3.9%, and Merrill Lynch Special UK which grew by 2.7%.
The CAPS UK Pooled Pension Fund Survey covers 87 separate investment institutions managing around £196bn in pooled funds, both balanced and specialist.
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