State Street Corporation, the provider of financial services to institutional investors, announced the preliminary results of its WM UK Defined Benefit Pension Fund and UK Charity Fund Universes for 2010. Initial estimates suggest that trustees of the average pension and charity fund will be looking at returns of around 13 percent.
“There was a general upward trend in the equity markets in 2010; although continued volatility often resulted in moves of one percent in a day. Most pension funds and charities maintained their investment strategies and were rewarded as markets generally continued to recover,” said Jeanette Patrizio, vice president of State Street Investment Analytics. “Local authority pension funds also benefitted from a higher commitment to equities and outperformed corporate schemes last year.”
UK equities, strategically the largest component of the majority of funds, returned close to 15% over the year, largely in line with the FTSE All Share index. International equities, which represent nearly 30% of the average fund, had mixed but positive results for the UK investor. North America, Japan, Asia Pacific (excluding Japan) and the emerging markets provided returns of between 17% and 25%. Continental Europe was comparatively weak with a return of just 6% for the year.
Currency was a feature of the international returns, as Sterling strengthened by around 4% against the Euro, but declined by 3% against the US Dollar and 18% against the Yen.
Bonds also posted solid positive returns over the year. Government bonds benefited during periods of uncertainty, with UK Government bonds, for example, returning 8%. Corporate bonds delivered higher returns as investors looked for better yields. Concern over inflationary pressure boosted index-linked returns to nearly 12%.
Returns from alternative strategies were highly variable although the aggregate returns for hedge funds and private equity were 11% and 19% respectively. Property turned positive with a return of 13% for the year.
D.C.