Weightings in UK Equities reach an all time low at the end of 2007
LONDON, January 22, 2008 – Statistics revealed by BNY Mellon Asset Servicing show that during the final quarter of 2007, balanced pooled funds achieved a median return of 1.0%. This is the second consecutive quarter that managers have failed to achieve real rates of return. Results were however, more favourable over a one-year period with the average fund returning 7.1%. This represents a real rate of return of 3.1% against the retail prices index.
Results for balanced pooled funds were also favourable over longer term periods and over three and five years to 31 December 2007, managers achieved average returns of 13.1% p.a. and 13.6% p.a. respectively.
During Q4 2007, active pooled managers achieved some successes when comparing their performance against their respective indices. Most notable were Emerging Market Equity managers who achieved a return of 1.3% in excess of the index, although Pacific Basic ex Japan and North American Equity pooled funds also achieved out-performances of 0.5% and 0.3% respectively. The same could not be said of European ex UK and Japanese Equity pooled funds which both failed to achieve an out-performance against the market return. UK Equity managers returned 0.0% and outperformed the FTSE All-Share by 0.3%
Despite achieving positive results in the first half of the year pooled property managers struggled in the latter half, and in Q4 achieved a median return of -7.6%. Property pooled funds ended the year with a return of -6.4%, however results over three and five years were a healthier 9.6% and 11.2% respectively.
During 2007, the majority of active pooled fund managers within our universe failed to achieve an out-performance when compared with their respective indices. The exceptions to this were Pacific Basic ex Japan pooled funds which returned 36.0% against an index return of 34.2%, and UK Smaller Companies Funds, which despite achieving a return of -8.1%, did generate an out-performance of 2.4%.
Within BNY Mellon Asset Servicing’s balanced pooled fund universe, the company noted that weightings in UK Equities reached an all time low of 43.5% at the end of 2007. This represents a fall of 1.2% over the quarter and an even more significant reduction of 3.5% over the last year. We also saw weightings fall in Europe ex UK and Pacific ex Japan Equities, as managers moved money out of these sectors during Q4 2007. The opposite was true for Emerging Market Equities which saw weightings boosted to an all time high of 4.8%, due to strong performance combined with manager movements.
Both UK and Overseas Bonds also benefited from positive relative performance, which combined with manager movements over the quarter, boosted weightings by 0.4% and 0.2% respectively. Managers also moved money into Cash during Q4 and weightings increased by 0.4%, however allocations in Property remaining static over this period. Over the last year, we have seen holdings in Property decrease from 1.0% to 0.7%, by contrast weightings in Cash have increased by 1.2%.
Commenting on the results, Alan Wilcock, BNY Mellon Asset Servicing’s Performance and Risk Analytics Manager, said: “2007 was a disappointing year in the UK Equity Standard section with only 37% of funds managing to beat the index return, combined with over £10 billion being withdrawn from those funds in the survey.”
BNY Mellon Asset Servicing’s Pooled Pension Fund Database covers the largest and most representative sample available to UK pension funds’ trustees. The company currently covers 75 separate asset managers who manage over £446 billion in pooled funds, both balanced and specialist.