Irish pension funds in weak performance to October 2016
The Aon Hewitt Managed Fund Index, an index representing the performance of traditional Irish pension managed funds, fell marginally by 0.06% in October while Rubicon Investment Consulting reports that managed funds had a loss of 0.1% on average over the month.
The Aon Hewitt index is up 2.5% year to date and Rubicon says pension funds have failed to make much headway in 2016, with the average fund gaining just 0.7% over the first ten months of the year.
Fiona Daly of Rubicon Investment Consulting commented:
Returns for the year to date ranged from 6.1% (Setanta Asset Management) to -5.8% (Merrion Investment Managers), representing a difference of almost 12% between the best and worst performing funds in just ten months. Over the past year, the average fund return was a disappointing 0.1%. Setanta Asset Management top the table over the past year with a return of 4.8%, while Merrion Investment Managers produced the lowest return at -5.5%. The average managed fund return has been a healthy 9.2% per annum over the past three years. The five-year average return is a strong 11.9% per annum. Irish group pension managed fund returns over the past ten years have been 4.2% per annum on average.
Aon Hewitt commented that global equity markets had a turbulent October. Mixed corporate earnings reports and falling energy prices in the latter part of the month took from some of the rallies seen in earlier in the month. The FTSE All World Index increased by 0.9% in euro terms over October. The cost of Brent crude oil dropped by over $1 and the euro weakened by 2.5% against the US dollar but gained on sterling (up almost 4%) and the yen (up over 1%).
Nicholas Hatherley, investment consultant at Aon Hewitt commented:
Global equity markets had a mixed start to the fourth quarter. Whilst there was positive manufacturing data from the US, the Eurozone and Asia this was undermined by lacklustre energy sector performance as concerns over the ability of OPEC nations to agree on a production cut resurfaced. In the US, all eyes move towards the presidential election and the impact this may have on global markets, while in the UK markets continue to try and interpret any indication of the path and timescales of Brexit...the biggest takeaway from October is the relatively significant increase in bond yields, particularly at longer durations where pension scheme liabilities tend to be focussed. Whilst this depresses bond valuations in isolation, it will be a welcome respite for those DB pension schemes that will have seen funding levels drop significantly over the first half of 2016 as these are likely to have recovered somewhat over October.
Aon Hewitt added that core Eurozone bond yields increased over the month with the German 10 year bond yield increasing by 27 basis points (bps or 0.27%) finishing the month at 0.08% while the French 10 year bond yield rose by 36 bps finishing the month at 0.48%. Peripheral Eurozone government bond yields also increased over the month with Portuguese 10 year bond yields increasing marginally to 3.33%, Italian 10 year bond yields increasing by 49 bps to 1.68% and the Irish 10 year bond yield increasing by 32 bps to 0.65%.
LCP Ireland's monthly report is here.
The chart on top is from April 2009.