Seven of the 10 hardest-hit funds focus on European smaller companies, while the other three focus on either Europe or small caps.
Performance of funds over 6-months
| Pension fund |
6-month returns (%) |
| AXA Wealth - AXA Framlington Talents |
-27.93 |
| Winterthur - AXA Framlington Talents |
-27.8 |
| Skandia - Henderson Euro Sm Cos |
-27.11 |
| SIP - Henderson European Smaller Companies |
-27.08 |
| Skandia - Schroder European Smaller Companies |
-27.05 |
| SIP - JPMorgan Europe Smaller Companies |
-26.95 |
| Scot Eq - JPM Europe Smaller Companies |
-26.82 |
| L&G - Stan Life Inv UK Opportunities |
-26.74 |
| FL - GM European Equity |
-26.53 |
| CIS - JP Morgan European Smaller Companies |
-26.52 |
Source: FE Analytics
AXA Wealth’s AXA Framlington Talents fund, which has a 58.51 per cent exposure to Europe, was the hardest hit in the ABI Pensions universe over this period, losing 27.93 per cent in the past six months compared with -11.34 per cent from its ABI Global Equities sector. Unsurprisingly, a mirror fund set up by Winterthur to copy the performance of AXA Framlington Talents finished second-bottom of the pile.
Two further mirror funds suffered the third- and fourth-highest losses over this period: Sanlam and Skandia’s duplicates of the Henderson European Smaller Companies fund lost 27.11 and 27.08 respectively in the period.
At the other end of the scale, nine of the 10 best-performing pension funds over the past six months have a focus on gilts, with Aviva Asia-Pacific Property the one exception.
Philip Haden, director at advisory firm McCarthy Taylor, said the heavy losses suffered by many pension funds demonstrate the importance of portfolio diversification.
“When many of our clients saw the FTSE had taken a hit over the summer, they rang us up worried that their portfolio had gone down by a similar amount [15 per cent]. However, because we advised them to invest across a variety of asset classes, including more defensive sectors such as fixed income and gilts, most of them found their pension pot had only gone down by about 2 per cent.”
Haden also believes the state of markets since the summer underlines how crucial it is for investors to take a more active approach to pension plans.
“It is essential that you regularly review your pension with an IFA. Many people invest through lifestyle funds, but the problem with these are that five to 10 years before retirement they will automatically begin to decrease the exposure to equities on certain dates. While the advantage is that they reduce risk in a portfolio the closer the holder comes to retiring, because they automatically move out of equities on a certain date, they may sell when the market is at its lowest point, which has the effect of crystallising losses.”
In a recent FE Trustnet article, Mark Dampier, head of research at Hargreaves Lansdown, also said that people need to be more proactive in the management of their pensions if they want to avoid this sort of nasty shock.