Active managers bounced back in 2000, after disappointing UK equity results for the previous three...
Active managers bounced back in 2000, after disappointing UK equity results for the previous three years, outperforming the FTSE All-Share index by 2.4%, according to the latest Caps report.
Nearly three quarters of all active portfolios managed to beat the FTSE index return of
-5.9%, pushing the UK median return to -3.5% with European equities recording a similar outperformance with 4.7% against an index return of 1.5%.
The outperformance came in a year when the highest ever proportion of schemes made some change to their investment management arrangements with 23% of schemes appointing a new manager, removed an existing manager, or having opened or closed a specific mandate. Caps research and development director Alan Wilcock said the 23% was a substantial increase from the 16% in 1999, which was also higher than the proportion in 1998.
He added: "The trend for schemes to have a passive core portfolio continues, particularly in larger pension schemes. While larger schemes are also more likely to use specialist managers than smaller schemes, most larger schemes still employ at least one manager to run a global equity, balanced or multi-asset account."
Median return for the year for pension funds was -1.4% for the year ending 31 December 2000. This followed subdued median returns in all four quarters of the year. Wilcock said it was only the fifth time in 30 years that the annual median has been negative.
He added: "However this should be seen against real returns which, over the five-year period ending on 31 December, continued to be positive at 7.1% per annum relative to earnings and 9.1% per annum relative to retail prices."
Wilcock said the increasing trend for pension funds to define their own benchmark meant that 2000 had been a relatively good year with 59% managing to beat their benchmark with an average outperformance of 0.6%.
He added: "During the 1990s, 4%-5% of pension schemes adopted their own scheme specific benchmark each year. By the end of 1999, 45% of schemes had a tailored benchmark. This surged to 57% during 2000 and now the majority of schemes follow their own asset allocation policy, rather than let it be determined by their asset managers with the result that most have slightly less invested in equities compared to those that don't set their own asset allocation."
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