Equity portions of with-profits funds has dropped to around 50% as groups decrease equity exposure.
Investment Week has carried out research and found that the top 20 UK with-profits funds have average equity exposure at just below 54% of total holdings. At the start of July 2002, Equitable Life had just 15% of its £17.6 billion portfolio invested in equities, representing the lowest figure in the survey.
Aviva group, formed from Norwich Union, CGNU Life Assurance and Commercial Union funds, came out top with 49% equity holdings at the end of June 2002. This was down on the figure of 54% equity holdings at the end of 2001. Out of the top 20 with-profits funds, seven have equities constituting less than 50% of the portfolio.
The most important question raised is whether the falling equity investments have happened due to regulatory reasons or investment decisions. A spokesman at Hargreaves Lansdown added that a bear market where stock prices are low should be an ideal time to move into the equity market for long term investments, such as pensions. This however appears to be the opposite of what is happening. He added that fixed interest is going to do well against equities if the market falls further, but by reducing equity exposure you are reducing your long-term potential.
Most, if not all, insurers are well aware of the influence of the current volatile market and the situation is under regular review.