With an ageing UK population, one might hope the WM Company survey would show an escalating UK Pensi...
With an ageing UK population, one might hope the WM Company survey would show an escalating UK Pension Funds market. Instead the survey shows that the UK pension industry has posted a negative return of -10% for the year 2001, the worst result since 1990.
Investors preferred transferring their funds from equities to bonds. This reflects the uncertainty among pension investors in the volatile equity market of the year 2001.
Eric Lambert, WM executive director commented: "2001 was a quite extraordinary year and one which most investors will want to put behind them. This year's results demonstrate the risks which are inherent in equity investment. The 1990s were a particularly strong period for equities and this extended period of outperformance may have lulled people into a false sense of security.
The 2001 results highlight the volatile nature of equities which remain the backbone of most pension funds. This comes in a period when the current market value of assets is important both for companies' accounts and the actuarial valuation of pensions."
Lambert adds: "UK bonds produced a return of around 3 per cent, compared with a return of -13 per cent for UK equities and -16 per cent for overseas equities. This coincides with the decision of some fund owners to move from equities to bonds, arguing that they provide adequate returns with less risk than equities. Those who made that decision will see benefits coming through in their short-term performance figures."
Except for bonds and property, the survey showed negative returns from all sectors. UK equities showed a negative annual return of -13.2%, not far off from overseas equities that showed an annual return of -15.7%. Japan was the sector with the worse figure, an annual return of -27.9%. North America was -11.5% and Europe had an annual return of -19.4%. UK bonds and overseas bonds returned 3.2% and 2.4% respectively while property returned 6.2%.
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