Pooled balanced funds earned a median 1.1% return in the first quarter, extending the recovery that began in 2003 when they earned an average of 18.1%, the first positive return in four calendar years, according to a report issued this week.
“Based on the net median return, pooled balanced funds lost around 30% of their asset value over the three years to the end of 2002. Since then these funds have regained around half of that asset value,” said Daniel Hall, Russell/Mellon’s Publications and Statistics Manager.
Performance was driven by positive returns in a number of key asset classes. UK Equities, which is the single biggest asset class in balanced pooled funds, achieved an index return of 0.6%. Index-Linked Gilts achieved the best market return of 2.8%, while Property (1.9%), UK Bonds (1.4%), Cash (0.9%) and Overseas Equities (0.8%) also provided positive returns. Overseas Bonds struggled this quarter however, returning – 0.8%.
Within Overseas Equities, Japanese Equities provided by far the best performance of 12.2%, while Pacific, ex Japan, (3.2%) and Emerging Markets (6.7%) also produced positive returns. North America (-0.8%) and Europe ex UK (-2.6%) offered the poorest overseas equity index returns. In North America and Europe, positive local performance was turned into negative sterling performance as the pound rose against both the dollar and the euro over the quarter.
Active UK Equity managers beat the FTSE-All Share index this quarter with a median return, after fees, of 1.3% against the index return of 0.6%. They also beat the index over three years, returning -3.5% p.a. against -3.8% p.a. and over five years, returning -1.7% p.a. against -2.7% p.a. However, these funds underperformed over the short and long-term. Over one year the median performance was 30.7% against 31.0%, while over 10 years the median return was 6.7% p.a. against 6.9% p.a.
UK Smaller Companies managers have continued to outperform, beating the FTSE Small Cap index over the quarter as well as over one, three, five and 10 years to 31 March 2004. Over 10 years the median return, after fees, was 9.0% p.a. compared with 6.2% p.a. for the index.
Within the UK equity market, mid cap stocks provided the best index return of 8.4% over the quarter. Small cap stocks beat the All-Share index returning 6.9%, while the large cap stocks of the FTSE 100 index provided a negative return of -0.8%.