Pension funds rally after five months of losses

IRISH PENSION funds recovered some ground in April after five successive months of losses. The average group managed pension fund reported gains of 4.2 per cent over the month as international stock markets recovered some poise.

However, the rally has not managed to raise the average return for Irish pension fund managers above the level of inflation over the last decade. Inflation in the last 10 years has averaged 3.8 per cent, while the average managed fund return has been 3.7 per cent.

However, four Irish managers bettered that – an improvement on the situation at the end of March when just one provider was beating inflation over the medium term.

Betty O’Reilly, of benefit consultants Hewitt Associates, noted that the rise came against the backdrop of an advance of more than 7 per cent in the FTSE World Equity Index and growth of just under 3 per cent on the Irish stock market.

Despite the turnaround in April, the average Irish group managed pension fund is still nursing losses of 7.7 per cent so far this year, and 12.6 per cent in the past 12 months.

“While the recent pick-up is very welcome, it is too early to say if the worst is over,” said Ms O’Reilly.

Standard Life Investments recorded the strongest performance last month with a gain of 5.1 per cent compared with just 2.9 per cent for Oppenheim, traditionally one of the better performers.

Over the year to date, Canada Life has survived the volatility best, with a loss of 6.8 per cent against the 9.8 per cent loss incurred by the fund run by Friends First/FC. The margin between either extreme widens over the one-year term, where Bank of Ireland Asset Management’s 15.4 per cent loss is notably worse than the 10 per cent decline in value at Eagle Star.

Over longer periods, funds are still recording gains, with the average return over three and five-year periods at 6.8 per cent and 8.9 per cent per annum respectively.