August shines on pensions as gains made for first time in three months

PENSION FUNDS gained ground in August for the first time in three months - with the average managed pension fund recording a 2 per cent investment gain.

But there was significant diversity in performance as stock markets staged a late summer rally.

Canada Life/Setanta delivered the standout performance with a gain of 3.2 per cent, almost three times the advance made by Standard Life Investments.

Despite the gains, pensions funds remain significantly in the red this year.

Over the first eight months of the year, the average Irish managed fund is still nursing losses of 15.2 per cent.

Going back to this time last year, figures are even worse, with an average decline of 18.5 per cent over the 12-month period.

Despite nursing losses of 14.3 per cent over the past year, Canada Life/Setanta has weathered the credit crunch better than any of its peers, with KBC Asset Management suffering most with a loss of 21.6 per cent over the same period.

In 2008 alone, Friends First/FC is the largest underperformer, recording losses of 17.9 per cent.

Industry sources said some of the divergence between funds could be attributed to the current torpor in the property markets. Pension funds value their property assets on a monthly basis.

However, with so little activity in the area, funds are struggling to get a proper picture of the current value of their general property holdings.

Although all are aware they will need to value their property holdings downwards, some have adopted a "more conservative approach", marking down their assets ahead of full clarity on values.

Over the longer term, pension funds are still struggling to better inflation, with the average return over the last three years amounting to a miserly 0.4 per cent per annum.

Even the best performers - Eagle Star and AIB Investment Managers - could only record annual gains of about 2.5 per cent.

Over the more relevant 10-year period, average annual gains amounted to 3.9 per cent compared with inflation of 3.8 per cent per annum - and only half the funds bettered that, including Oppenheim, which continues to lead the way with annual returns over the past decade of 5.9 per cent per annum.