Pension funds up 5.9% in first quarter

Irish pension funds rose 5.9 per cent in the first quarter of 2010, after gains made by fund managers during the month of February were consolidated by a positive performance in March.

A stock market rally last month helped pension funds pick up an average monthly return of 5.8 per cent, according to new data from investment consultancy firm Rubicon.

The pension fund run by Irish Life Investment Managers (ILIM) put in the strongest performance during March, with a rise of 6.5 per cent, while Merrion Investment Managers propped up the monthly table with a 4.7 per cent return.

ILIM was also the top performing fund manager over the quarter, with a 7 per cent gain. It also made the highest gains over an annual basis, in which it clocked up a return of almost 43 per cent.

Aviva Investors made the lowest gains on a quarterly basis, while over a one-year period, the worst performing manager was AIB Investment Managers. However, it still made a gain of almost 30 per cent over the year to March 31st.

The return made by pension funds averaged at 36 per cent over the period, during which equity markets bounced back as the global recession bottomed out and greater clarity emerged about the extent of investment losses in the financial system.

Rubicon attributed the gains made last month to more positive economic data and a pick-up in merger and acquisition activity.

Over longer periods, however, the performance of Irish pension funds remains subdued. The average return over the past three years is minus 6.9 per cent per annum, which Rubicon described as "very disappointing".

Over a five-year period - which includes the benefits of strong equity markets during 2005-2007 - all of the funds made positive returns. The best performer was Eagle Star / Zurich Life over this timeframe, with a 4.2 per cent return per annum compared to an average of 1.8 per cent per annum.

Over a 10-year period, the average return on an Irish pension fund is 0.3 per cent. This is "well below the Irish inflation rate of 2.7 per cent per annum over the same time horizon", Rubicon noted.

"Indeed, none of the managed funds surveyed outperformed inflation over this period, while four of the 10 funds failed to deliver positive returns over 10 years."