Almost 40% (17) of mutual insurers' with-profits funds outperformed all the largest proprietary firms' with-profits fund returns in 2014, according to a survey by Barnett Waddingham, the UK actuarial and consulting firm.
In 2013 only one mutual insurer's with-profits fund outperformed all the same proprietary firms' with-profits funds over the calendar year. The major proprietary firms referred to include Legal & General, Friends Life Company, Friends Life Assurance, Prudential, Aviva, Standard Life and Friends Provident.
The report, now in its second year, investigated the investment returns of 44 with-profits funds across 24 mutual insurers, in order to understand sources of differences in return and observe investment strategy trends.
Other results from the survey:
- The average returns of mutuals' with-profit funds was 8.79% in 2014 (6.23% in 2013);
- The overall return achieved by mutual insurers' with-profits funds over 2014 ranged from 3.2% to 16.57%, reflecting variations in investment aims and strategies across the funds;
- Larger with-profits mutual funds noticeably outperformed smaller mutual funds; and
- Stock selection was a bigger driver of performance than asset allocation in 2014, highlighting the importance of manager selection and performance.
Scott Eason, partner and head of insurance consulting at Barnett Waddingham, said the survey also showed "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."
