European equity holdings at lowest level since 1996

PrecipiceMore evidence for the sell-off of European equities emerged when figures showed UK pension schemes had their lowest weighting in the sector for 16 years through their balanced pooled fund investments.

The weighting in European ex-UK equities dropped from 10.7% in the first quarter to 10.3% in the second quarter - the lowest level recorded by BNY Mellon Asset Servicing, which produced the numbers, since 1996.

The findings follow research recently by Morningstar, a fund data firm, that showed European investors withdrew more than €21 billion from equity funds in the second quarter.

Meanwhile, UK equity weightings fell from 39.5% to 39.3% in Q2, the BNY Mellon figures showed, after a brief period when weightings to the sector increased slightly at the start of the year.

Balanced pooled funds had a difficult Q2 with a median return of -2.9%. Over a one-year period the return was -4.1% thanks mainly to a large negative return of -12% in Q3 2011.

Bond returns were in positive territory. The strongest returns of the quarter came from international bond pooled funds with 3.4%. Index-linked gilt pooled funds produced the highest return over one year with 16.6%.

Balanced pooled funds were more favourable over a three-year period with a return of 11.1% per annum and they also made some small gains over a five-year period with the median fund returning 1.6% per annum.

Over a ten-year period to 30 June 2012, the average fund returned 6.2% per annum.

Alan Wilcock, performance and risk analytics manager at BNY Mellon, said: “The poor performance of Europe's equities is no surprise, given re-emerging concerns about the financial health of Europe’s sovereigns in the second quarter. This, coupled with economic fragility in the US and China, stoked widespread volatility and in turn impacted investor confidence and equity performance.”

Returns from other Overseas Equities funds were also negative over the quarter and ranged from -3.4% for North American equity funds to -6.6% for emerging market equity funds.

©2012 Funds Europe