Pension funds maintain signs of recovery

IRISH-MANAGED pension funds recovered more ground in July, delivering growth for the fifth consecutive month.

Pension funds recorded an average return of 6 per cent last month, according to data published by Rubicon Investment Consulting.

Although Irish pension funds lost more than 7 per cent of their value in January and February, this latest strong performance has brought all funds back into positive territory for the year to date.

In fact all but two Irish fund managers have delivered double-digit growth for the first seven months of the year, with returns for this period averaging 11.8 per cent.

Merrion Investment Managers led the field, with a seven-month return of 18.6 per cent, while AIB Investment Managers trailed with a gain of 6.1 per cent.

“It is interesting to note that over the past five months, since the end of February, funds have gained an average of 20.8 per cent,” said Fiona Daly, managing director of Rubicon. Ms Daly highlighted the risk of trying to “time” the market, which can result in the crystallisation of losses, rather than waiting for equities to rebound: “Investors who may have moved out of equities at the end of 2008, in an attempt to avoid stock market turbulence, will have missed out on this ‘bounce’.”

Performances over the last year are less encouraging, with all funds still in the red for that period. The average loss sustained over the past 12 months stands at 12.4 per cent.

Over the longer term funds are back in the black. However, although positive, the 10-year average return produced by fund managers was a disappointing 0.8 per cent.

In fact, Merrion was the only manager to succeed in beating the average annual inflation rate for the last decade, which is estimated at just above 3 per cent. Merrion delivered an annual return of 3.4 per cent for that period.

AIB Investment Managers and KBC Asset Management remain in negative territory when assessed on their 10-year performance, having shed 0.6 per cent and 1.3 per cent respectively per annum.