UK pension funds posted a negative return of –1.8% for 2000, according to estimates by the WM Company.
The disappointing results for 2000 reflect the fact that equity markets showed exceptional volatility, with technology and telecommunication stocks levelling the remarkable gains of 1999.
The fall of internet technology and telecommunication company values were contrasted by the rise in more traditional stocks; such as in the consumer and utility sectors.
Despite the negative results, UK pension funds outperformed the FTSE all share index by 1.5% (-4.5 against –6%), the widest lead by the funds in 10 years. Japanese and Pacific equities showed a decline of around 25% and 17% respectively for the UK investor. North America was flat and European equities gave positive returns of 5%.
In total, equities gave negative returns of –6.5% for UK pension funds, in comparison to the FT/S&P World ex UK index, which indicated returns of –4.1%.
Bonds and property, on the other hand, showed positive returns. The decline of sterling made overseas bonds market a fruitful investment, with returns of over 12%. UK bonds returned over 8%, mainly from the income stream due to stable interest rates.
The year showed a slight shift in investment from equities towards bonds, according to the survey. UK equity exposure is expected to show a fall from 51% to 48.9%.