Having declined in January, for the first time since October 2009, Irish pension funds recovered lost ground during February, with the average managed fund gaining 1.3% over the month, boosted the value of returns in euro from overseas markets in cases where the currency risk has been unhedged.

Three managers shared top spot with a return of 1.5% for the month - - Aviva Investors, Setanta Asset Management and Merrion Investment Managers - -  while Irish Life Investment Managers propped up the league table with a 0.9% return for the month. February’s gains mean that most funds are back in the black for 2010 so far, with the average return over the first two months of the year coming in at 0.1%.

"Over the past twelve months all of the managed funds surveyed delivered double-digit growth, with the average fund returning 31.8%. Returns for the past year ranged from 38.8% (Merrion Investment Managers & Irish Life Investment Managers) to 23.7% (AIB Investment Managers), representing a difference of 15.1% between the best and worst performing managers over the period. The average managed fund return has been a very disappointing -8.3% per annum over the past three years," Fiona Daly, managing director, Rubicon Investment Consulting, commented.

However, the five year returns to the end of February are positive on average, delivering a mean return of 0.6% per annum over this period. Irish group pension managed fund returns over the past ten years have been a disappointing 0.2% per annum on average, well below the Irish inflation rate of 2.7% per annum over the same time horizon. Indeed, none of the managed funds surveyed outperformed inflation over this period, while four of the ten funds failed to deliver positive returns over 10 years."

Mercer Ireland said this week that there are ongoing concerns about the prospects for recovery in the global economy, and these have led to a muted performance by stock markets in recent weeks. In Europe, there are additional specific concerns over the funding position of a number of countries in the Eurozone region; and of these, Greece has attracted the most focus. These worries have weighed heavily on the Euro currency, and it has fallen sharply against the dollar and other currencies. However, this has resulted in one silver lining for investors, as the weak currency has boosted the value of returns in euro from overseas markets in cases where the currency exposure has been unhedged. In essence, this explains the positive performance recorded by pension funds in February.

"We have commented before that 2010 looks like being a very uncertain year as the global economy attempts to sustain the growth recovery kicked-off during 2009. Already this year we have seen markets react to a number of different concerns and factors, making it a difficult environment for investors and for pension fund trustees. However, such an environment does produce investment opportunities, and it is important that clients make the most of such opportunities in such a difficult environment,” Brian Griffin, Head of Investment Consulting at Mercer commented.