The report identifies a number of separate and interconnected conclusions:

1. There is approximately a current market value of £200 billion held in mainstream unit linked pension funds.


2. Of this nearly £170 million is in asset areas which relate to the UK; put another way 85% of all money invested is in the geographical region of the UK, demonstrating a striking lack of diversification amongst investors.


3. Of the £200 billion invested, about half is in Managed Funds; these funds have spectacularly failed to deliver any return comparable to any respectable measure or benchmark. The failure of these funds is absolute.


4. To evidence this, compare the average returns of the four managed fund sectors with various benchmarks:

Balanced Managed    +14%
Cautious Managed      +23%
Defensive Managed    +28%
Flexible Managed       +16%

This is the return in total over the 10 years to 31.08.2009

Compare this to:

Money Market Funds +40%

Or to typical portfolios** we have constructed from the funds reviewed:

Low Risk        +37%
Medium Risk +30%
Higher Risk     +39%

Or to the average investment trust:

+92%

It should be stressed that the above is the average managed fund performance figures, many funds have produced less than the average and many sizeable funds from household names fall into this category.

Here is a random sample of half a dozen, showing their fund size and 10 year return to evidence this:

Friends Provident Managed Fund      £4.4 billion      +10.5%
Lloyds TSB Managed                         £3.8 billion      +12.5%
Scottish Life Managed                       £2.2 billion      +6.8%
Scottish Equitable Mixed                   £6.7 billion      +8.4%
Phoenix Exempt Managed                  £1.5 billion      +6.5%
Lincoln Balanced Managed                £1.2 billion      +11.5%

These six funds alone have £20 billion (about 10% of the market) in them and the weighted average return is barely 1% per year over the past ten years. This is mismanagement to a stunning extent.

5. By calculating a weighted average for the whole market we have found that the weighted total return for the £200 billion invested in these areas is 21.793% over the past ten years, which is almost precisely 2% per year.

6. However from the 30 sectors it is clear that 2 or 3 completely dominate the league tables. Asia Pacific assets produced an average return of 97%, but the only sector which produced a return of more than 100% was the Emerging Markets sector which produced 233.5%. The commodity sector would probably have produced a similar impressive return however there are no listed funds with 10 year performance.

However of the £200 billion in total how much is in these sectors?

Asia Pacific £2 billion (approx)
Commodities £0.5 billion (approx)
Emerging Markets £0.7 billion (approx)

So only about 1.5% of investors money is in these high performing sectors.

7. Overall a dramatic lack of diversification is evidenced. With the UK based investments (including managed funds which typically invest in the UK) representing 85% of all assets held, investors are backing UK PLC to be the area almost solely responsible for their return. In investment terms this is nonsensical.