Irish Economy
Irish pension managed funds returns at over 12% year-to-date in 2015
By Michael Hennigan, editor and founder of Finfacts
Aug 7, 2015 - 8:12 AM

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Average Irish pension managed funds returns were over 12% year-to-date to July, 2015 with Rubicon Investment Consultants reporting a return of 12.5% as per the above chart while the Aon Hewitt Managed Fund Index, an index representing the performance of traditional Irish pension managed funds, increased by 2.59% in July. This has contributed to the index delivering a positive return of 11.98% since the beginning of the year and 21.27% over the past 12 months.

Fiona Daly of Rubicon Investment Consultants commented: "At the start of the month, both equity and bond markets declined in response to the rejection by the Greek people of the bailout package on offer at a referendum on 5 July. However, subsequent to this, agreement was reached in principle between the Greek government and its creditors for a larger bailout with stricter terms – seen as preferable to leaving the euro, which was the only other option available. Following this agreement, markets rallied to end the month in positive territory.

Irish pension managed funds delivered positive returns on average during July, with the average gain being 2.2%. Zurich Life were ranked top this month with a return of 3.5%, while Setanta Asset Management propped up the league table with a return of 1.3%. The first seven months of 2015 have seen very strong pension managed fund returns, with an average return of 12.5%.

Merrion Investment Managers top the table over the year to date with a return of 16.4%, while Setanta Asset Management produced the lowest return at 9.5%. Over the past twelve months, the average fund return was 22.1%. Returns for the year ranged from 28.5% (Merrion Investment Managers) to 15.4% (New Ireland), representing a difference of over 13% between the best and worst performing funds over the past twelve months.

The average managed fund return has been a very strong 16.2% per annum over the past three years. The five-year average return is a healthy 12.4% per annum. Irish group pension managed fund returns over the past ten years have been 5.8% per annum on average.

Aon Hewitt said that positive returns were delivered across all regions in the first half of July as Greece struck a deal with its creditors, accepting an austerity plan which staves off the immediate threat of the country defaulting on its debt. Weaker than expected quarterly corporate earnings reports and falling commodity prices towards the end of the month caused a decline resulting in the FTSE All World returning a modest gain of 1.7% for the month. Emerging Markets was the weakest performing region (-6.1%) as the Chinese stock market continued its correction.

"Markets were volatile over the month as investor sentiment improved initially following the plan for the Greek debt crisis but contracted as volatility in the Chinese equity market raised concerns about the health of the Chinese economy and commodity demand," commented Nicholas Hatherley, investment consultant at Aon Hewitt.

Core Eurozone bond yields decreased over the month with the German 10 year bond yield finishing at 0.61%, a decrease of 17 bps (basis points) while the French 10 year bond yield decreased 26 bps to 0.94%. Peripheral Eurozone bond yields also decreased over the month as the Portuguese 10 year bond yield decreased 59 bps to 2.39% and the Irish 10 year bond decreased 60 bps to 1.04%.

"Irish Defined Benefit pension schemes may have seen a decrease in their ongoing funding positions as falling bond yields will have increased the valuation of their liabilities while growth asset performance may not have fully compensated for this increase. It's likely that the less mature schemes with significant growth asset holdings will have fared worse than better matched more mature schemes with larger bond holdings," added Hatherley.

LCP Ireland said in a commentary on the market: "In summary, global equity markets have risen by 2.1% in July and have increased by 14.0% so far in 2015.

Bond markets also increased over the month with long-dated Eurozone government bond prices up 4.9% by month end.

The funding level of a sample DB (defined benefit) scheme increased as assets grew more than liabilities, with the majority of asset classes rising in July.

All our sample DC (defined contribution) strategies had positive returns for the month, and those with a high exposure to long-dated government bonds performed the best."

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