Irish pension funds returns fell about 4% in January 2016
A slide in share prices in January 2016 resulted in a monthly fall of about 4% in the returns of Irish pensions funds.
Fiona Daly of Rubicon Investment Consulting Limited commented:
January was another disappointing month for Irish pension funds, which fell back 4.3% on average. Setanta Asset Management were ranked top this month with a return of -3.0%, while Standard Life Investments propped up the league table with a return of -6.0%. Over the past twelve months, the average fund return was a lacklustre 0.2%. Returns for the year ranged from 2.0% (Merrion Investment Managers) to -2.2% (Friends First/BMO).
The average managed fund return has been a very strong 11.8% per annum over the past three years. The five-year average return is a healthy 9.5% per annum. Irish group pension managed fund returns over the past ten years have been 4.2% per annum on average.
The Aon Hewitt Managed Fund Index, an index representing the performance of traditional Irish pension managed funds, fell -3.6% in January. Despite negative performance over the month, the index delivered a positive return of +1.4% over the past twelve months.
Global equity markets fell over the month of January. The FTSE All World Index decreased by -5.7% in euro terms. The FTSE North America was the strongest performer in euro terms returning -4.8% whilst the FTSE Japan was the worst performer in euro terms returning -7.9%.
Darragh Gavin, Investment Consultant at Aon Hewitt commented:
Global equities sold off heavily over the beginning of the month, marking a volatile start to the year. Disappointing economic data and a weakening yuan renewed concerns over the health of the Chinese economy and fears of a slowdown in global growth. However, during the second half of the month dovish comments from the ECB along with a surprise move by the Bank of Japan to adopt a negative interest rate policy drove global equities higher.
Core Eurozone bond yields decreased over the month with the German 10 year bond yield finishing at 0.27%, a decrease of 37 basis points (bps or 0.37%) while the French 10 year bond yield decreased 32 bps to 0.66%. The peripheral Eurozone government bond yields had a mixed month. The Portuguese 10 year bond yield increased 14 bps to 2.67% while the Italian 10 year bond yield decreased to 1.43%, a decrease of 17 bps. The Irish 10 year bond decreased 28 bps, finishing at 0.68%.
"Irish defined benefit pension schemes will most likely have seen their funding levels fall over January due to negative asset returns coupled with rising liabilities due to falling bond yields," Gavin added.
LCP Ireland said in a report:
Global equities had their worst start to a year since the global financial crisis in 2008, stemming from concerns over a slowdown in China’s economic growth, a further fall in oil prices and uncertainty about central banks monetary policy.