Irish Economy
Irish pension managed funds had a good month in May
By Michael Hennigan, Finfacts founder and editor
Jun 6, 2014 - 10:05 AM

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Irish pension managed funds delivered positive returns during May, with a mean gain of 2.6% for the month. Friends First/F&C and Standard Life Investments shared top spot with returns of 3.0% for the month, while Merrion Investment Managers propped up the league table with a return of 2.2%. Managed funds returned 4.9% on average over the first five months of 2014. Setanta Asset Management delivered the strongest return over the year to date at 6.1%, while Prescient Investment Managers and Merrion  Investment Managers produced the weakest returns, returning 3.5% over the same period.

Over the past twelve months, the average fund return was 11.3%. Returns for the year ranged from 13.7% (Standard Life Investments) to 9.7% (Prescient Investment  Managers).

Fiona Daly, Rubicon Investment Consulting managing director, commented: "The average managed fund return has been a healthy 10.3% per annum over the past three years. The five-year average return is  very strong, at 11.7% per annum. Irish group pension managed fund returns over the past ten years have been 5.5% per annum on  average, compared with the Irish inflation rate of 1.5% per annum over the same time horizon. All of the managed funds surveyed outperformed inflation over this period."

LCP Ireland said in its May report that global equities increased by nearly 4% over the month. Long dated AAA Eurozone bonds also rose in May as bond yields fell for a fifth month in a row.

The funding level of a typical DB (defined benefit) scheme increased by approximately 1.4%, as assets increased more than liabilities.

DC (defined contribution) schemes with a high allocation to growth assets performed best in May.

The Aon Hewitt Managed Fund Index, an index of traditional Irish pension managed funds, increased by 2.72% in May. This has contributed to the index delivering a positive return of 6.05% since the beginning of the year.

Global equity markets rose in May with the FTSE All World Index increasing +3.9% in Euro terms. Japan was the best performing region in Euro terms, as the FTSE Japan Index returned +5.8%.

The S&P 500 Index posted a number of fresh record highs towards the end of May as global stock markets strengthened on positive economic data and indications that the US Federal Reserve is in little hurry to raise interest rates. This coupled with market focus on expected European Central Bank monetary easing fuelled market gains.

"Equity markets have strengthened on the expectation that the ECB will loosen monetary policy further following the meeting on the 5th of June in an effort to spur higher inflation in the region. Eurozone government bonds also benefitted from this expected policy, as government bond yields moved even lower over the month," commented Cathal Fehily, investment consultant with Aon Hewitt.

Eurozone government bonds experienced a strong month again in May, encouraged by expected accommodative monetary conditions. The German 10 year Bund yield fell 11 basis points (bps) to 1.36% while the French 10 year yield fell 18 bps to 1.77%. Peripheral Eurozone bond yields also fell over the month in line with core yields.

"Irish defined benefit pension schemes will have seen their liabilities rise again in May given the fall in core Eurozone government bond yields. However, strong asset performance over the month should compensate for this increase in liabilities and schemes will generally see a small improvement in their funding levels," added Fehily.

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