May 04, 2011

Balanced Pooled Funds Start 2011 on a Steady Note

BNY Mellon's Q1 2011 CAPS survey reveals impact on Japanese equities by recent disaster

LONDON, 4 May 2011 — Statistics released by BNY Mellon Asset Servicing today show that balanced pooled funds had a positive start to 2011, albeit a small one. The Q1 2011 return for balanced pooled funds was 0.8%, while the yearly return was stronger standing at 7.8%. This is the third consecutive positive quarter for the balanced sector. Seven out of the last eight quarters have been positive.

Data from BNY Mellon's latest quarterly CAPS survey, Q1 2011, shows that the three-year return stands at 6.2% per annum. This is despite four quarters of the period's first year all being negative thanks to the market volatility triggered by the financial crisis. The five and ten year medians were also positive with returns of 4.3% per annum and 5.3% per annum respectively.

UK equity managers also started 2011 on a positive note with a return of 1.0% for the quarter which also matched its index, the FTSE All-Share. The twelve-month figure was 10.3%, which outperformed its index return of 8.7%.

"Over the last ten years, balanced pooled funds have achieved a median return of 5.3% per annum, reasonably ahead of retail price inflation of 3.0% per annum," noted Alan Wilcock, Performance and Risk Analytics Manager at BNY Mellon Asset Servicing. "Outperformance by UK equity managers over the last year was mainly attributable to smaller companies outperforming their larger counterparts."

The story of the quarterly performance for UK equity is identical to the balanced sector, with the last three quarters all positive and again seven out of the last eight quarters were all in the black. This has led to a three-year return of 5.3% per annum, which only slightly lost out to its index which returned 5.4% per annum. The five and ten-year returns came in at 3.7% per annum and 4.7% per annum respectively, both matching their respective index returns.

Though UK equity has enjoyed positive returns quarter on quarter, its asset holdings have decreased by 0.2% to 38.0% from Q4 2010. On the whole this has been due to manager movements away from UK equity.

Japan disaster impacts Japanese equities

The majority of equity sectors were positive in Q1 2011, with the sole exceptions of Pacific Basin Ex Japan, emerging market equities and Japanese equities, the latter which was without question impacted by the recent earthquake and tsunami. Japanese equities posted a return of -6.9% in Q1 2011.

"The last time Japan suffered a natural catastrophe of similar scale was in the first quarter of 1995 when an earthquake struck Kobe," observed BNY Mellon's Wilcock. "An analysis of our data shows that in that quarter, Japanese equities returned -9.8%. At the time it took until Q3 1995 for Japanese equities to return to positive territory."

Europe Ex UK brightest in Q1 2011

Of all the pooled equity sectors European Ex UK provided the best return for Q1 2011 with 4.9%, though it underperformed the FTSE World Europe Ex UK index which returned 5.6%. This performance has seen a large increase in the holding of Europe Ex UK equity with Q4 2010 holdings coming in at 12.4% and Q1 2011 coming in at 13.3%. The 0.9% increase has largely been driven by equity managers moving into the sector though performance has also had an impact.

Over twelve months, the return was a healthy 8.0% per annum comfortably beating its index which returned 7.0% per annum. The longer term periods also provide positivity with 3.8% per annum for the five-year period and 5.4% per annum for the ten-year period.

UK smaller companies enjoyed a good start to Q1 2011 with a return of 3.7% though this has been much lower than the two previous quarter returns of 15.2% and 13.0% for Q3 2010 and Q4 2010 respectively. It also easily beat its index, the FTSE Small Cap, which returned 0.2% for the quarter.

Another good performer was North American equity with a return of 3.4%, though it narrowly missed matching its benchmark which returned 3.5%. There was positive movement quarter on quarter for the sector with its asset share increasing by 0.5% from Q4 2010. The current holding of 14.2% is the highest since May 2010 and was mostly driven by managers moving into the sector.

In the short to medium term, North American equity provided high one-year and three-year returns with 8.9% and 10.4% per annum respectively. The longer term returns were still positive, though not as strong with 4.3% per annum over five years and 2.1% per annum over ten. The downside to this was that none of the periods mentioned outperformed the FTSE All World North American index.


While the majority of equity sectors were positive for Q1 2011 the majority of the bond sectors were negative. The main exception to this was UK bonds which enjoyed a 0.5% return beating the FTSE A All Stock Gilts which returned -0.8%. Even though the UK bonds sector was positive quarter on quarter, manager holdings in bonds reduced by 0.2%. UK bonds returned 5.5%, 6.1%, 4.5% and 5.2% per annum over one year, three years, five years and ten years. Of these periods only the five-year failed to beat its index.

International bond holdings also fell though only by a small margin of 0.1%. The quarterly return of -1.1% was better than its index, JP Morgan Traded World Ex UK, which returned -1.9%. Index Linked funds, which saw its holdings rise by 0.2 in the quarter, returned -0.1 for Q1 2011 losing out to its index, FTSE A ILG (All Stocks), which returned 0.0%.

"UK Bond holdings have seen see-saw allocations over the ten-year period with Q1 2001 starting at 7.7%, rising to a ten-year high of 10.6% in Q1 2009, then steadily dropping to the current level of 7.2%," said BNY Mellon's Wilcock.

Survey size

BNY Mellon Asset Servicing's Pooled Pension Fund Database covers the largest and most representative sample available to UK pension funds' trustees. BNY Mellon Asset Servicing currently covers 55 separate asset managers who manage over £382 billion in pooled funds, both balanced and specialist.

The performance analysis and other information in this press release are based on historical data and are intended for informational purposes only. Past performance is not a guarantee of future performance. This press release does not constitute investment advice, nor is it an offer or recommendation of any security, investment product, service or firm.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.5 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at

This press release is issued by The Bank of New York Mellon to members of the financial press and media. All information and figures source The Bank of New York Mellon unless otherwise stated as at 31 March 2011. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818. Branch office: One Canada Square, London E14 5AL. Authorised and regulated in the UK by the Financial Services Authority.