UK Equities and Emerging Market Equities Drive DB Pension Returns

New research has shown that trustees of defined benefit schemes saw an average return of 13% on investments last year, buoyed by strong equity performance.

(January 6, 2011) — UK defined benefit pensions returned approximately 13% in 2010, a decrease from 15% in 2009.

A report by State Street Investment Analytics’ WM UK Defined Benefit Pension Fund Universe showed the return estimate was aided by UK equities, which returned an estimated 15% in 2010, and emerging markets equities, where returns were as high as 25% in some countries. According to State Street, public UK pensions benefitted from higher equity allocations, outperforming corporate plans.

SSIA noted that continental European equities only offered growth of 6% for the year, following the UK, as well as North America, Japan and Asia Pacific, which returned between 17% and 25%. State Street’s research showed a small shift from equities to bonds in DB schemes last year, with equity weighting falling from 51% to 49% and bond weight rising from 33% to 35%.

Meanwhile, BNY Mellon said UK and international bonds posted gains of 7.2% and 9.9%, respectively, for the year, while real estate returned an estimated 9.6%.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

ATP's CEO Lars Rohde has said that the fund will avoid government bonds issued by the European Union's most indebted nations, as it considers the risk too great.

(January 6, 2011) — Danish fund ATP has said it will avoid government bonds issued by the European Union’s most indebted nations, according to the CEO of the $73.4 billion Danish pension fund.

“When we invest in government bonds, it’s absolutely critical for us that there can be no doubt that we’ll get our money back,” said Lars Rohde, chief executive officer at ATP, in an e-mailed reply to questions from Bloomberg. He added that consequently, the fund has completely avoided government debt issued by Greece and Ireland, with European government bond holdings only including Danish, German and, to a lesser degree, French bonds.

While Greece received a $146 billion loan from the EU and International Monetary Fund in May and will post a 7.4% budget deficit of gross domestic product, Ireland received an $110.6 billion rescue package and will post the biggest deficit this year in the EU at 10.3% of GDP, Bloomberg reported.

At the end of the third quarter, according to the fund’s quarterly report on October 28, ATP had a total investment portfolio of $70.3 billion and delivered a return on total assets of 5.7% in the first nine months.

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In related news, two of Denmark’s largest pensions — the €14 billion PensionDanmark and ATP — are considering joint property and infrastructure deals, a decision that comes as schemes finalized a joint purchase of three department store buildings, representing the country’s largest real estate deal in 2010.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742