Pension funds leap ten per cent in three year high

25 June 2003
Pension funds have increased by 10 per cent for the first time in over three years, according to new figures from HSBC.

The bank reveals that balanced pooled pension funds rose in value by over 10 per cent in the three months to May 30th, the first such increase since December 1999. Funds also rose by 6.1 per cent in the first five months of 2003.

The HSBC Actuaries and Consultants Limited's latest IMAGE survey shows that funds have regained the losses suffered since the beginning of the year, but the results still make gloomy reading for pension scheme investors. Despite the recent rally in equities, the average return over the 12 months to the end of May is still a negative 13.3 per cent.

Jonathan Fish, investment consultant at HSBC Actuaries and Consultants, commented, 'There is a willingness to see equity markets push higher and investors are positive on any economic data that is being released at present.

'We feel that this is a start of better days for UK pension funds but may have to wait until September to see if this is the next phase of a bull market or a gain rally that could easily be snuffed out.

'The nature of the recovery has caught a number of investment managers by surprise, as previously unfavoured growth sectors have led the market higher.

'It will be interesting to see if this move towards what are perceived to be higher risk areas of the market, such as technology, media and telecom stocks, continues or whether there is rotation back into so called value stocks.'

Baillie Gifford was the best performing manager since the beginning of the year with a return of 7.3 per cent, while the worst performer over the same period was Allianz Dresdner with a return of 3.8 per cent.

In the longer term, JP Morgan Fleming's Institutional Balanced Fund came top over the year (-9.6 per cent) while UBS holds top place for the three-year period (-4.3 per cent).