Can the Good Returns Continue?

Article Abstract:

In the United Kingdom, pension fund investment has shown high returns in the 1980s with the average return about twenty-six per cent compared with wage increases at eleven plus per cent. In the years between 1963 and 1979, the return on pension fund investment was over three per cent below wage earnings. The downward trend in interest rates and the inflation rate contributed to the decrease in returns from United Kingdom property and index-linked gifts. In order to forecast returns for 1983 to 1986, the pension fund manager needs to consider which element the United Kingdom government and others are fighting, primarily inflation or unemployment. The fight over finflation has been too hard-fought, so economic recovery will probably not be long-lasting. Therefore, future money is best invested in gilts rather than equities. It is unlikely that the high returns of the 1980s can continue as inflationary expectations cannot be sufficiently further reduced to produce another significant decline in yields. Fixed-interest investments investments are probably the best bet.

Accounting and auditing, Investments

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Investing in Private Companies

Article Abstract:

Relaxation of investment regulations on local authority pension funds in the United Kingdom makes examining investments in unquoted companies beneficial. The market is competitive. Private companies seeking equity funding are usually smaller, more profitable, but less secure than public companies as their management is entrepreneurial. The skills required to examine risks and potential of private companies are more substantial than those needed to examine public companies. Three investment opportunities exist: start-up, management buy-out, and unlisted securities market. The risks of the start-up are substantial; approximately one in ten will produce good capital growth. Very few management buy-outs have failed, however. Unlisted securities market provides the investor with a stake in a developing company without locking in on a long-term basis.

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Pension Funds and Property: Measuring Performance

Article Abstract:

Measurement of performance of pension funds investments is essential due to the potential change in contribution rate caused by only small changes in performance. Investment in property assets cannot exceed twenty-five per cent for local authority pension funds, but this is still a significant proportion. Valuation of property is more difficult than other investments. In order to assess property assets' effects on a portfolio, one can determine property portfolio valuations separately from others, then combine and compare to see if they have a positive or negative effect on the overall portfolio. Property investments need to be valued on a long-term basis. Property investments need to be valued according to their relationships with expected increasing income and with a reminder of level of risk.

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