Results just released from our With Profits Survey 2015 reveal that almost 40% (17) of mutual insurers' with-profits funds outperformed all of the largest proprietary firms'* with-profits fund returns in 2014. In 2013 only one mutual insurer's with-profits fund outperformed all of the same proprietary firms' with-profits fund returns over the calendar year.
The report, now in its second year, investigated the investment returns of 44 with-profits funds across 24 directive mutual insurers, in order to understand sources of differences in return and observe investment strategy trends.
There was a wide range of returns achieved by with-profits funds over 2014, with returns ranging from 3.20% to 16.57%. Average returns were greater than in 2013. Seventeen funds outperformed all of the major proprietary funds investigated. Also, larger funds noticeably outperformed smaller funds.
Despite under performance of UK equities compared to other asset classes during the year, stock selection was a bigger driver of performance than asset allocation. We saw a wide range of performance for virtually all asset classes. This is an unusual result as it is usual for asset allocation to be the biggest driver, as was seen in 2013. This highlights the importance of manager selection.
"There was a wide range of returns achieved by with-profits funds over 2014, with returns ranging from 3.20% to 16.57%. Average returns were greater than in 2013"
Generally, we saw increases in equity holdings over 2014 and in particular, holdings of overseas equities generally increased. There was no material industry trend on holdings between gilts and corporate bonds.
Commenting on the survey findings, Scott Eason, Partner and Head of Insurance Consulting, said: "The results demonstrate that mutual insurers can generate greater with-profits returns than the larger proprietary funds. However, it also shows that not all funds are equal – the performance of the underlying investment managers is critical in maximising member benefit. We can only see the trend for frequent monitoring of the market participants and the drivers of their success increasing."