Irish Economy
Irish pension managed funds had average return of 2.7% in July
By Finfacts Team
Aug 7, 2013 - 8:58 AM

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Irish pension managed funds delivered positive returns during July, with an average return of 2.7% for the month.

Irish Life Investment Managers and Standard Life Investments shared top spot with returns of 3.2% for the month, while Merrion Investment Managers and Prescient Investment Managers propped up the league table with returns of 2.1%.

With six out of seven months recording gains, managed funds have now returned 9.6% on average so far in 2013. Setanta Asset Management delivered the strongest return over the year to date at 13.4%, while Merrion Investment Managers produced the weakest return, gaining 8.1% over the same period. Over the past twelve months, the average fund return was 13.6%. Returns for the year ranged from 17.7% (Setanta Asset Management) to 11.4% (Zurich Life).

Fiona Daly, managing director, Rubicon Investing Consulting, said: "The average managed fund return has been a healthy 8.9% per annum over the past three years. The five-year average return is 5.2% per annum. Irish group pension managed fund returns over the past ten years have been 5.3% 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."

Aon Hewitt, the Irish unit of Aon plc, reports that the Aon Hewitt Managed Fund Index, an index of traditional managed pension funds, grew by 2.6% in July. This has contributed to the Index delivering a positive return of 9.5% since the beginning of 2013.

Equity markets rebounded from the sell off seen towards the end of the second quarter. Global equities rebounded by 2.7% in July as measured by the FTSE World Index. Central banks globally moved to dismiss any thoughts of removing support to the healing global economy by re affirming their accommodative stance. As a result we saw the S&P500 rally to a new all time high bettering its May 2013 peak.

"The fragile nature of markets was exposed towards the latter end of the second quarter when markets became spooked by indications from the Federal Reserve that it would scale back its bond buying program as early as September, and we saw a distinct sell off. Since then, Federal Reserve chairman Ben Bernanke has softened his stance and indicated that he will remain accommodative as long as required," commented Denis Lyons, senior consultant with Aon Hewitt. "Following these comments, and similar commitments to low interest rates from the BOE and ECB, equity markets rallied. Pension schemes that have hedged their overseas currency exposure will have benefitted as the Euro strengthened," added Lyons

Eurozone bond yields subsided somewhat over July after a significant rise in June. German 10 year bund yields were down 6 basis points to 1.67% while French 10 year bond yield was down similarly at 11 basis points to 2.24%. The ECB's reaffirmation of it's ultra low rate policy ultimately contributed to the fall in yields over July.

"Irish Defined Benefit Pension Schemes will have seen a slight increase in their liabilities over the month due to falling bond yields," commented Lyons. "However asset performance would have been strong enough over the month to negate the fall in yields and most schemes should see an improvement in their funding levels," he added. "While bond yields have fallen slightly this month following last months significant rise we continue to expect an upward push in interest rates in the coming months and schemes should have the appropriate framework in place to be able to take advantage of this rise when the market opportunity presents itself."

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