Equity funds are now outperforming property as an attractive investment and will continue to do so, according to KBC Asset Management (KBCAM).

This contrasts strongly with the period 1998-2004 in which returns were significantly higher for property investments than equity investments, according to KBCAM chief executive Seán Hawkshaw.

"There is a reasonable possibility of 15 per cent growth in pension funds this year. Gains will be mainly driven by equities," said Mr Hawkshaw.

A study by Mercer investment consultants, published this month, also suggested that the average Irish managed pension fund has increased in value by 9.2 per cent to date in 2005 on a year-on-year basis.

That study suggests that the recent weakening of the dollar is partly responsible for the strength seen in global equity returns.

However, KBCAM cites the half-year annual growth of 11.3 per cent in the euro-denominated FTSE Eurobloc index as evidence of growth in equities that is less influenced by such currency factors.

Mr Hawkshaw said that equity growth would continue to be strong but gradually moderate.

"There is a bull market and no sign of a bubble. We expect returns to moderate over the economic cycle," he said.

KBCAM expect average property prices to grow moderately this year, while returns on bonds are also likely to remain low, according to Mr Hawkshaw.

Bond returns - which move inversely to bond prices - have been driven down in recent years as have corporate and pension fund demand.

These safer assets rose earlier in the decade.

The National Pensions Reserve Fund, which manages funds with a market value of €11,689 million, reported annualised returns of 9.3 per cent and 7.9 per cent for 2004 and the first half of 2005 respectively.