PENSION funds should consider the use of derivatives to maximise returns, Mr Pramit Ghose advised the Irish Association of Pension Funds (IAPF) last night. Speaking at an IAPF meeting in Dublin, the head of investments at Friends Provident said that pension fund members and trustees should not be afraid to use derivatives.

Conventional conservative investment strategy involving high fixed interest exposure may not be the best approach, he said. Pension funds should look at secured equity portfolios combining term deposits and call options on large stock markets. Since 1945, secured equity portfolios have outperformed gilts in 34 out of 47 three year periods, generating an average return of 47.7 per cent against 23.2 per cent for gilts, he said.