Pension funds lose $1.5 tn in share slump

London, Jan 30 | Updated: Jan 31 2008, 06:45am hrs
The global share sell-off may have wiped up to $1.5 trillion off the value of global institutional pension fund assets since the start of this year, consulting firm Watson Wyatt said on Wednesday.

With the average allocation to equities within pension funds in the 11 largest pension markets at 56%, they have felt the pain of the global equities market slump, while pension liabilities grew faster than their assets last year, said Watson Wyatt.

2007 was a year of two distinct halves, said Roger Urwin, Watson Wyatts global head of investment consulting.

In the first half pension fund balance sheets continued to strengthen, but faltering markets in the latter half largely undid these gains. Severe market events this year suggest that balance sheets will remain under pressure.

The UK had the highest allocation to equities in 2007 at 64%. Pension assets in the 11 largest pension markets -- Australia, Canada, France, Germany, Hong Kong, Ireland, Japan, the Netherlands, Switzerlrand, UK and the US -- grew 9% to over $25 trillion in 2007.

But the asset growth rate last year was down on the five-year average of 12%, the survey said.

Asset allocation into equities during the course of 2007 fell from 60% to 56%, while money invested in bonds grew to 28% from 26%, as did the cash shifted into alternative investments, such as real estate, hedge funds, private equity and commodities.

UBS losses mount, bank sees redZurich, Jan 30 Subprime-related problems at UBS AG mounted on Wednesday as the Swiss bank unveiled $4 billion in new write-downs in a surprise statement and sank deep into the red for the year.

The latest disclosure lifted the banks total write-downs from the subprime debacle to $18.4 billion and will likely increase pressure on chairman Marcel Ospel, at the UBS helm during its push into risky US investments, to resign.

UBS, world bankings leading wealth manager, posted a $11.45 billion loss for the last three months of 2007 , a grim closure to its worst performance in history.

UBS shares fell 1.7% in early trading as analysts puzzled over the new losses, but later pared most losses. One could become very emotional about UBS -- continuously behind the curve in write-downs and hence always topping-up, exposure disclosure is poor to new write-downs, and management leadership vacuum, said analysts at investment bank JP Morgan. This is certainly not good, said analyst Georg Kanders at bank WestLB.

UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused around $130 billion in losses, mangled balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.

The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader -- the worst trading loss in history by far.

Mizuho losses may hit $2.8 billion: report

Tokyo, Jan 30

Subprime losses at Japans Mizuho Financial Group may have nearly doubled to $2.8 billion, potentially forcing the bank to further cut its forecast and plough more money into its struggling brokerage, newspaper reports said on Wednesday.

Japanese banks have so far avoided the massive subprime losses that have hit overseas rivals, and Mizuho has even invested $1.2 billion in struggling rival Merrill Lynch Still, Tokyo lenders have not escaped unscathed.

Soured bets on subprime investments forced smaller Mizuho rival Shinsei Bank to cut its earnings outlook for a second time this financial year, and the lender now expects profit to fall 30% short of its original forecast.

Losses from subprime are clearly not over and will continue to increase from here, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

Reuters