Irish Economy
Irish pension managed funds returns were in range 6% to 7% in H1 2014
By Finfacts Team
Jul 4, 2014 - 1:24 AM

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Irish pension managed funds returns in H1 2014 were on average in the range 6% to 7%. 

Rubicon Investment Consultants said on Thursday that Irish pension managed funds delivered positive returns during June, with a mean gain of 1.1% for the month. Advance Investment Managers (formerly Prescient Investment Managers) and Setanta Asset Management shared top spot with returns of 1.7% for the month, while Irish Life Investment Managers and Zurich Life propped up the league table with returns of 0.7%.

Over the second quarter of the year, the average fund return was a very respectable 4.1%. Advance Investment Managers were the top performers over the quarter, delivering 5.0%, while Merrion Investment Managers were the weakest, delivering a return of 3.0% over the three months. Managed funds returned 6.1% on average over the first half of 2014.

Setanta Asset Management delivered the strongest return over the year to date at 8.0%, while Merrion Investment Managers produced the weakest returns, returning 4.7% over the same period. Over the past twelve months, the average fund return was 15.8%. Returns for the year ranged from 18.2% (Standard Life Investments) to 14.5% (Advance Investment Managers).

The average managed fund return has been a healthy 11.5% per annum over the past three years. The five-year average return is very strong, at 11.9% per annum. Irish group pension managed fund returns over the past ten years have been 5.4% per annum on average.

According to Aon Hewitt Ireland,  the Aon Hewitt Managed Fund Index, an index of traditional Irish pension managed funds, increased by 0.8% in June. This has contributed to the index delivering a positive return of 6.9% since the beginning of the year.

Global equity markets rose in June with the FTSE All World Index increasing +1.6% in euro terms. Japan was the best performing region in euro terms, +5.1%, while Ireland was the worst performing index for the second month in a row, returning -4.0%.

The S&P 500 increased 1.9% in June for its fifth straight monthly gain, despite mixed economic data. North American equities returned +2.0% as measured by the FTSE North America, despite the Federal Reserve sharply downgrading its 2014 growth forecast. In the background, geopolitical tensions heightened with no resolution to the Iraq conflict in sight.

"Despite relatively rich valuations for both stocks and bonds, capital continues to flow into markets where it is treated best. This strong momentum move higher in both equities and fixed income is feeding on itself to a certain extent and investor confidence is running high; perhaps too high," commented Brian Delaney, investment consultant with Aon Hewitt.

Eurozone government bonds experienced a strong month again in June, encouraged by the comment of Mario Draghi, ECB president, that quantitative easing was still a possibility. The German 10 year bund yield fell 11 bps to 1.25% while the French 10 year yield fell 18 bps to 1.59%. Peripheral Eurozone bond yields also fell over the month in line with core yields.

"Irish Defined Benefit (DB) pension schemes will have seen their liabilities increase again in June given the continuing fall in core Eurozone government bond yields. However, pension schemes will see little change in their funding levels, as the rise in global equities should offset this increase in liabilities," continued Delaney.

LCP Ireland said in an investment summary: "The DB funding level of our sample scheme improved in June as assets increased by 1.4%, with liabilities (calculated using a MFS proxy) increasing by just 1.0%. As a result, the funding level of our sample scheme increased by 0.5% to 92.6%.

Sample DC Schemes
All of our sample DC (defined contribution) Schemes continued to increase in June as all asset classes had positive returns. The relative underperformance of multi-asset funds meant that schemes with a high multi-asset allocation, such as the High Risk Strategy, slightly underperformed the Medium Risk and Pension Purchase Strategy"

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