Irish Economy
Irish pensions funds performed strongly in February
By Michael Hennigan, Finfacts founder and editor
Mar 5, 2015 - 7:15 AM

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Irish pensions funds performed strongly in February and the Aon Hewitt Managed Fund Index, an index representing the performance of traditional Irish pension managed funds, increased by 5.2% in in the month. This has contributed to the index delivering a positive return of 25.7% over the past 12 months.

Global equity markets continued to move higher over the month, with the market reacting positively to the conclusion of Greek bailout negotiations and investors remaining optimistic about the impact of the European Central Bank's quantitative easing programme which commences in March. A number of benchmark indices hit fresh all-time highs, including the FTSE 100 which finally broke the high of 6950 set in December 1999.

"February proved to be another very positive month for global equity markets with the FTSE All World Index increasing by 6.2% in euro terms over the month. This builds on positive returns from January and the FTSE All World Index has now increased by 12.2% in euro terms since the beginning of 2015," commented Cormac O'Leary, investment consultant at Aon Hewitt.

Core Eurozone bond yields were little changed over the month. The German 10 year bond yield finished at 0.32%, an increase of 1 bps. The French 10 year bond yield decreased 1 bps to 0.53%.

The peripheral Eurozone government bond yields decreased over the month following the announcement of the European Central Bank's quantitative easing programme with the Irish 10 year bond yield decreased 34 bps to 0.79%, the Portuguese 10 year bond yield decreased 77 bps to 1.66%, and the Italian 10 year bond yield down 37 bps to 1.32%.

"The funding position of Defined Benefit pension schemes, will have improved over February as pension scheme liabilities have remained relatively static in line with core Eurozone bond yields. As a result, funding positions will have improved in line with the strong asset returns experienced over the month,." continued O'Leary.

Rubicon Investment Consulting reported that the mean managed fund gain for the month was 5.4% (see chart above). Merrion Investment Managers took the top spot with a return of 6.3% for the month, while Friends First/F&C propped up the league table with a return of 4.8%. Pension managed funds have returned a very strong 10.4% on average over the fist two months of 2015. Merrion Investment Managers led the charge with a return of 12.1%, with New Ireland lagging the peer group but still delivering 9.2% so far this year. Over the past twelve months, the average fund return was 25.8%. Returns for the year ranged from 28.8% (Davy Asset Management and Merrion Investment Managers) to 20.6% (New Ireland).

The average managed fund return has been a very strong 16.8% per annum over the past three years. The five-year average return is a healthy 12.9% per annum. Irish group pension managed fund returns over the past ten years have been 6.5% per annum on average.

LCP Ireland said that global equity markets continued their strong start to 2015, rising by 6.3% in February.

Long-dated AAA Eurozone government bond yields rose slightly although yields in some peripheral Eurozone Government Bonds hit new lows during the month.

"The funding level of a typical DB scheme increased as assets rose more than liabilities in February.

Our sample High Risk and Medium Risk DC Schemes performed strongly in February, but the Pension Purchase Strategy was down slightly due to the increase in AAA long bond yields" — LCP commentary.

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