UK – British pension funds gave their first indication of shedding their conservative image with news that some are looking at shifting away from traditional investments into venture capital.
UK – British pension funds gave their first indication of shedding their conservative image with news that some are looking at shifting away from traditional investments into venture capital.
The biggest indication of the change comes from the Coal Pension Scheme, the pension fund for former National Coal Board staff, which says it is looking to move up to £1 billion out of typical investments, such as equities and bonds, and into venture capital.
One motive for looking at venture capital is the potential returns. Returns on venture capital in-vestments averaged 30 per cent last year, compared with a return of 17.5 per cent from investing in the FTSE 100 index, according to the British Venture Capital Association.
Yet three quarters of UK funds avoid any form of venture capital investment while the remainder dedicate about an average of 1 per cent of their funds into venture capital.
Last year, UK pension funds allocated only £553 million of their £760 billion into venture capi-tal, down from £622m the previous year and contributed only 10 per cent of the funds raised by UK venture capital firms with another £1.9bn invested by overseas pension funds.
Regardless of returns, pension funds still face a statutory obstacle, the government’s minimum funding requirement (MFR). The MFR places a restriction on certain investments within pension fund portfolio and acts as a discouragement to invest in unquoted companies, since such invest-ments are hard to realise in an emergency. Even if the MFR is relaxed to take account of venture capital, the effect may be limited with only the larger pension funds likely to consider putting money into venture capital.
Smaller schemes with limited funds and less time to monitor venture capital investments may still regard them as too risky for the returns.
Fund costs drop
USA — The cost of running a mutual fund has steadily fallen over the past 19 years, according to US research house the Investment Company Institute (ICI).
Equity fund costs decreased 40 per cent from 1980 to 1998, driven down by declining sales charges and investors’ preferences for low-cost funds. Expenses for bond and money market funds over the same 19 year period declined 29 per cent and 24 per cent respectively, according to the ICI.
NatWest war
UK- Scotland’s largest bank, Royal Bank of Scotland (RBS) and Australia’s largest bank, the National Australia Bank (NAB) may join the Bank of Scotland in a bidding war for National Westminster Bank, the UK’s third largest bank.
The two banks have emerged as the main rivals to the Bank of Scotland who have placed a hos-tile offer for NatWest, valued at £22bn.
The two Scottish banks had been working on a joint bid to divide NatWest’s branch network between them but abandoned the approach because of concerns about the regulatory response.
Scudder hit
US — Zurich investment management subsidiary Scudder Kemper Investments has suffered more than $US3.3 billion in mutual fund outflows in this US this year as their biggest funds continue to slump.
The losses represent more than 5 per cent of the combined $US61.6 billion total in stock and bond funds held by the group in the US. Scudder Kemper now manages about $US290 billion in assets for institutions and individuals around the world and has made some changes in manage-ment and restructuring of funds in response to the losses.
Germany – Europe’s second-largest insurer, Allianz AG is in talks to buy Pimco Advisors, the biggest US bond fund manager, for about $US4.4 billion.
If successful the bid by Munich-based Allianz would be the second biggest in the funds man-agement business.
The acquisition of Pimco would boost Allianz’s funds under management by about $US255 bil-lion to more than $US600 billion, helping it compete with Axa SA, its biggest rival in European insurance.
Egypt – Cairo’s desperate search for attractive stocks has left fund managers wondering whether even the Egyptian government’s plans for future privatisations will act as a sufficient stimulus to a market that appears barely to have emerged from more than in a year in the doldrums.
Two long-awaited IPOs, one in the state-owned Cairo Electricity Company – which is expected by the end of this year – and the other in Egypt Telecom – before June 2000 – are now in an ad-vanced stage of planning. The number of shares on offer has yet to be announced, though the sale of the utilities will certainly inject a degree of variety into the stock market which has been lacking.
Calls by fund managers for an acceleration of the privatisation process, which led in effect to a relaunch of the Egyptian Stock Exchange in 1997, have intensified as the market has found itself buoyed by increasing reliance on shares in a single company, Mobinil, the private sector mobile telephone operator.
