Irish pension managed funds' returns rose again in April
By Finfacts Team
May 9, 2013 - 8:49 AM

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Irish pension managed funds delivered further positive returns during April, with an average return of 0.8% for the month. Standard Life Investments took top spot with a return of 1.2% for the month, while Friends First/F&C propped up the league table with a return of 0.2%. Building on the first quarter’s gains, these returns have resulted in managed funds returning 8.2% on average over the first four months of 2013.

Setanta Asset Management delivered the strongest return over the four months at 11.2%, while Merrion  Investment Managers produced the weakest return, gaining 7.0% over the same period. Over the past twelve months, the average fund return was 15.4%. Returns for the year ranged from 18.8% (Setanta Asset Management) to 14.2% (Friends First/F&C and Zurich Life).

Fiona Daly, managing director of Rubicon Investment Consulting, commented: "The average managed fund return has been a healthy 7.5% per annum over the past three years. The five-year average return is 2.7% per annum. Irish group pension managed fund returns over the past ten years have been 5.7% per annum on average, compared with the Irish inflation rate of 1.7% per annum over the same time horizon. All of the managed funds surveyed outperformed inflation over this period."

Meanwhile, Aon Hewitt, a unit of London-based Aon plc, says its Aon Hewitt Managed Fund Index, an index of traditional managed pension funds, rose 1.01 % in April. The Index has delivered a positive return of 8.61% since the start of 2013.

"Pension fund asset values have gained from a strong rally in equity markets which continued into the second quarter," commented Betty O' Reilly, senior investment consultant with Aon Hewitt. North American equities continued to rise over April supported by positive earnings growth, although with the euro strengthening against the US dollar. Euro based investors will have experienced marginally negative returns from the region. Eurozone equities, which had lagged behind other regions in the first quarter, were up 3.18% from last month as contagion from instability in Italy and Cyprus diminished.

"We have seen a renewed sense of optimism amongst investors recently. This is in sharp contrast to the nervousness surrounding the 'fiscal cliff' at the end of 2012. The VIX index, which measures investor feeling in the market, is slightly higher than the previous month standing at 13.52 as at 30 April, however this is a far cry from the 22.7 before the turn of the year," continued O' Reilly.

Prices on Eurozone bonds also rallied with expectations of an ECB rate cut underpinning prices and the diminution of perceived risk in peripheral eurozone regions. The Merrill Lynch 10+ Year Bond Index yield fell from 3.4% at the start of the month to 3.04% at the close of April. German 10 year Bund yields also fell from 1.29% to 1.20% throughout the course of the month leading to an increase in pensioner liability costs.

"For Irish Defined Benefit Schemes record lows in AAA bond yields continue to keep the cost of pension provision stubbornly high. Despite healthy returns from risk assets many schemes remain underfunded," remarked O'Reilly.

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