2008-04-02
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Hewitt Associates Limited, a market leader in actuarial, strategic benefits and investment consulting, has just confirmed that Hewitt Managed Fund Index return fell 3.6% during March.
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Raymond Bourke of Hewitt Associates has confirmed that the index has recorded a further fall of 3.6% for March 2008, or a total of -11.4% for the first quarter of 2008. The quarterly fall of 11.4% is the worst quarter for the Index since Q3 2002 (-12.2%) during the last equity bear market, and before that the 'Twin Towers' quarter in Q3 2001 which recorded -14.0%. The worst 12 month period of recent times was the year ending Q2 2003 (-22.5%).
The first quarter saw a decline in world equities of 16.1%, with the corresponding figure for Ireland showing a drop of 10.0%. Key first quarter returns within this included -16.0% for the Eurozone, -17.3% for the UK and -16.5% for the US. The modest rise of 1.4% in 10 year bonds provided little respite, being only slightly ahead of cash returns of 1.1% for the quarter.
Looked at from the viewpoint of annual returns, the worst calendar year in recent times was 2002 when the Index returned -19.2%. However, in the five years that followed, markets rebounded by 75% cumulatively or 11.8% per annum demonstrating that pension funds are long-term investments and returns over periods of 5 or 10 years are much more important for most members than individual years or quarters.
March saw more negative news from the financial sector, including further bond write-offs by banks, the near–collapse of Bear Stearns and greater evidence of a credit squeeze. Added to this were the sharp rise in oil, the continued downturn in the US housing market and the acceptance by most commentators that the US is now in recession. In the US, the three main economic variables - interest rates, the exchange rate and budget policy - have all moved favourably to stimulate growth but so far have not had the desired impact. The Fed has cut the benchmark rate aggressively but money market margins have risen, while the tax cuts have yet to have an effect. The weak dollar has helped exports but not the broader domestic economy. In the Eurozone, policymakers have decided not to cut rates so far because inflation is at 3.5% compared to the ECB target of 2%, but it has provided a large amount of liquidity.
Two of the main real asset classes, equities and property, have both been affected by the restrictions in credit and the downturn in growth, and these results emphasise the need to find greater diversification through investment vehicles whose performances are not closely correlated to equities.
Hewitt's monthly Pooled Fund Performance Survey will follow detailing the performance of the Irish managed funds for March 2008.
About Hewitt Associates
For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services. Hewitt consults with more than 3,000 large and mid-size companies around the globe to develop and implement HR business strategies covering retirement, financial and health management; compensation and total rewards; and performance, talent and change management. As a market leader in benefits administration, Hewitt delivers health care and retirement programmes to millions of participants and pensioners, on behalf of more than 300 organisations worldwide. In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees. Located in 33 countries, Hewitt employs approximately 23,000 associates. For more information, please visit www.hewitt.com.
