Irish Economy
Irish pension managed funds performed poorly in April
By Michael Hennigan, Finfacts founder and editor
May 8, 2014 - 9:58 AM

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Irish pension managed funds delivered positive returns on average during April, with a mean gain of 0.3% for the month, according to Rubicon Investment Consulting.

Most funds delivered broadly similar returns, with Prescient Investment Managers taking top spot with a return of 0.8% for the month, while Merrion Investment Managers propped up the league table with a return of -0.5%. Managed funds returned 2.2% on average over the first four months of 2014. Setanta Asset Management delivered the strongest return over the quarter at 3.4%, while Prescient Investment Managers produced the weakest return, returning 1.0% over the same period. Over the past twelve months, the average fund return was 10.2%. Returns for the year ranged from 12.0% (Irish Life Investment Managers) to 8.9% (Prescient Investment Managers).

Fiona Daly, Rubicon Investment Consulting, said: "The average managed fund return has been a healthy 9.6% per annum over the past three years. The five-year average return is very strong, at 11.6% per annum. Irish group pension managed fund returns over the past ten years have been 5.1% per annum on average, compared with the Irish inflation rate of 1.6% per annum over the same time horizon. All of the managed funds surveyed outperformed inflation over this period. "

The Aon Hewitt Managed Fund Index, an index of traditional Irish pension managed funds, increased by 0.66% in April. This has contributed to the index delivering a positive return of 3.27% since the beginning of the year.

Global equity markets rose in April with the FTSE All World Index increasing +0.4% in euro terms. The FTSE UK was the best performing region in Euro terms, returning +3.7%.

Resurgent fears over conflict in the Ukraine impacted returns with emerging market equities falling by -0.3% in April as measured by the MSCI Emerging Markets Index. The FTSE Japan Index experienced another negative return in April of -3.2% in Euro terms having failed to produce a positive monthly return since the beginning of the year. The ISEQ Index also continued to fall in April for the second month, returning -1.7%.

"Continued tensions in the Ukraine have resulted in another poor month for riskier assets as emerging market equities fell. By contrast the global equity market delivered positive returns for the month overall," commented Darragh Gavin, investment consultant with Aon Hewitt.

Eurozone government bonds experienced a strong month again in April, as bond yields fell. The German 10 year bund yield fell 11 bps to 1.47% while the French 10 year yield fell 15 bps to 1.95%. Peripheral Eurozone bond yields also fell over the month, with the Portuguese and Spanish 10 year bond yields decreasing 43bps and 22bps respectively over the month. The Irish 10 year bond yield fell 2 basis points (bps) to 2.82%.

"Irish Defined Benefit (DB) pension schemes will have seen their liabilities rise in April given the fall in core yields. Negative performance from riskier growth assets and subdued returns elsewhere has also had a negative impact on schemes which will generally see a fall in their funding level," continued Gavin.

LCP Ireland said that Developed World equities increased by 0.5% over the month, and Emerging Market equities were up 0.6%. Long dated AAA Eurozone bonds also increased in April as bond yields fell further.

The funding level of a typical DB scheme decreased by approximately 0.1%, as liabilities increased faster than assets.

DC (Defined Contribution) schemes with a high allocation to bonds performed best in April.

LCP report

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