Strong equities take pension funds to 15.4% growth

IRISH pension funds recorded an average return of 15.4 per cent in 1996, making it another good year for the industry.

A survey of Irish managed funds, issued yesterday, shows Friends Provident as the top performer in 1996, adding 19 per cent to the value of its managed pension fund over the 12 months.

Over five years, however, Bank of Ireland Asset Management comes out on top, with average annual growth of 14.6 per cent.

Research by pension consultants Mercer and the Irish Pensions Trust shows that most pension funds were able to benefit from another good run in the equity markets last year, particularly in the Irish stock market.

Next to Friends Provident, Eagle Star and Guardian Life put in good performances, both increasing the value of their pensions funds by 17.3 per cent. The weakest returns for the year were shown by Canada Life, with its funds increasing in value by 12.7 per cent. AIB Investment Managers funds also came in with well below average returns of 13.6 per cent followed by Irish Life at 13.7 per cent.

Over five years, the average annual increase in fund value was 13.4 per cent. By this measure, Standard Life closely followed Bank of Ireland Asset Management's top performance (14.6 per cent), with annual growth of 14.4 per cent, while Canada Life's funds returned at 13.9 per cent.

Irish Life had the worst performance over the past five years, showing below average annual returns of 11.6 per cent to the value of its funds. AIB Investment Managers improved slightly on this at 12.5 per cent while Hibernian Life showed annual returns of 12.7 per cent.

Taking a longer term view, the survey shows that, over 10 years, the funds surveyed on average achieved annual growth of 12.1 per cent, with Bank of Ireland Asset Management showing the top performance at 13.4 per cent per year.

The Irish stock market, where up to 30 per cent of the pension funds are invested, proved again to be one of the best performers, rising by 25.5 per cent in 1996.

The Irish gilt market, which accounts for 20 per cent of funds invested, also yielded good gains, with stock values up by 13 per cent over the 12 month period.

The property sector was also profitable, with returns estimated at around 18 per cent.

International equity and bond markets also enjoyed some growth, with the British market showing returns of around 20.9 per cent for the year.

The US market rose by 23 per cent, but its performance was dulled somewhat by a weakening dollar, yielding returns of 16 per cent. Continental Europe showed a gain of 13.2 per cent, while emerging markets returned 15.5 per cent for the year.

Japan was the only major international market to show a loss, for the second successive year, with a 20 per cent drop for Irish investors as a result of the weakening yen and its falling stock market.