Continuing fears over economic recovery impact equity performance

Property and Bonds see more positive results with single digit returns

LONDON, 26 July 2010 — BNY Mellon Asset Servicing’s quarterly pooled fund survey show that balanced pooled funds ended their run of positive quarters with a negative return of -8.9% for Q2 2010. This is the first negative quarter that BNY Mellon has recorded since Q1 2009 however the 12-month median* return still remains positive at 18.6%.

Data from BNY Mellon’s Pooled Pension Fund Database, which covers the largest and most representative sample available to UK pension funds’ trustees, shows that balanced pooled funds were also negative over three years with -1.8% but showed solid returns over five and ten-year periods to 30 June 2010, with returns of 4.9% and 2.7% per annum respectively.

For Q2 2010 returns were negative for all the major equity sectors. UK Smaller companies posted the highest return with -3.7%. The lowest equity return was provided by Europe Ex UK Equity with -14.1%.

UK Equity pooled fund managers recorded a return of -11.1% in Q2 2010 which outperformed the FTSE All Share Index by 0.7%. Over the twelve months to 30 June 2010, UK Equity achieved 20.0% which underperformed its Index which returned 21.1%. For the three-year period UK Equity posted a negative return with -5.3% per annum; this outperformed its index by 0.4% per annum. The five and ten-year periods however, show positive returns of 3.7% per annum and 1.5% per annum respectively with the five year return beating its index while the ten year just failing to match its index return for the period.

During Q2 2010 Global Equity retuned -11.1%. This return underperformed its index by 0.4%%. For the twelve-month period Global Equity achieved 20.9% while the Index achieved 23.8%. In line with the other equity sectors the three year period return was negative with -3.2% per annum. The five-year return for Q2 2010 was positive with 4.5% per annum while the ten-year return came in at 1.4% per annum. Of these longer term returns only the ten-year beat its index.

During the second quarter of 2010 UK Bond pooled fund managers returned 2.7% which under performed the comparative market index by 1.8%. International Bond pooled fund managers also record a positive return achieving 1.9%. International Bonds also underperformed their Index which returned 2.8%. Cash posted a return of 0.1% for Q2 2010 which matched its Index.

Continuing their run of positive returns Property pooled fund managers recorded 2.8% during the quarter which beat its index by 0.2%. Over the twelve-month period to 30 June 2010, the median return for this sector was also positive with a return of 19.6%.

Commenting on the performance of balanced pooled funds, Alan Wilcock, Performance and Risk Analytics Manager at BNY Mellon Asset Servicing, said: “Continuing fears over economic recovery, budget deficits, bank debts and the oil crisis in the Gulf of Mexico, all weighed heavily on equity markets during the second quarter driving prices lower, removing some, but by no means all of the gains made over the last twelve months.”

Weightings slide in UK Equities after year of gains

Within BNY Mellon’s balanced pooled fund universe, the weightings in UK Equities fell 0.6% from the previous quarter to 37.1%. This can be attributed mainly to manager movements during the quarter.

Weightings in Overseas Equities fell during the quarter by 1.3%, most notably North American Equity with a decrease in holdings of 0.8%. North American Equity primarily fell due to manager movements.

Within Bonds, weightings for the UK increased by 0.6% to 8.9% over the quarter mainly due to manager movements. International Bonds increased by 0.4% to 4.1%. Weightings in Index-Linked Gilts also rose by 0.1% to 0.6%. Weightings in Property rose over the quarter by 0.1%.

BNY Mellon Asset Servicing’s Pooled Pension Fund Database currently covers 61 separate asset managers who manage over £350 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 Asset Servicing offers clients worldwide a broad spectrum of specialised asset servicing capabilities, including custody and fund services, securities lending, performance and analytics, and execution services.

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, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $21.8 trillion in assets under custody and administration and $1.0 trillion in assets under management, services $11.6 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com.

* To generate a median BNY Mellon first calculates the returns for the underlying funds within the respective sector for the time period required. BNY Mellon then selects the median fund from these funds. BNY Mellon only generates a Median if there are nine of more funds available within the sector and BNY Mellon does not chain link medians to get longer term returns.
 

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 as at 30 June 2010 unless otherwise stated. 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.