Irish pension funds lost further ground in June, as the average managed fund
returned -1.8% for the month. Standard Life Investments and Eagle Star/Zurich
Life shared top spot with a return of -1.5% for the month, while Setanta Asset
Management propped up the league table with a -2.7% return. As a result of
losses experienced during May and June, the average managed fund delivered a
return of -3.7% over the second quarter (Q2) of 2010. The average annual return
was negative over 5 years and below inflation over 10 years.
During the second quarter, the best performing managed fund was that of
Standard Life Investments, which lost 2.6%; while the worst performing managed
fund over the three months to the end of June was that of Setanta Asset
Management, which returned -4.9%. In spite of this, the average managed fund has
advanced 1.9% over the first half of the year; with returns ranging from a high
of 3.7% (Standard Life Investments) to a low of 0.4% (Aviva Investors). Over the
past twelve months all of the managed funds surveyed delivered double-digit
growth, with the average fund returning 17.7%. Returns for the past year ranged
from 20.3% (Standard Life Investments) to 15.0% (AIB Investment Managers).
Fiona Daly, Managing Director,
Rubicon Investment Consulting,
commented: "The average managed fund return has been a very disappointing
-9.1% per annum over the past three years. The five year returns to the end of
June are mostly negative, with an average return of -0.2% per annum over this
period. Irish group pension managed fund returns over the past ten years have
been a disappointing 0.3% per annum on average, well below the Irish inflation
rate of 2.5% 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."
"Pension funds suffered from the
uncertainty in the global markets over the last few months," commented Brian Delaney, Investment Consultant at Hewitt
Associates. "Global equities fell by 3.3% over the quarter, while Eurozone
equities declined by 8.9%."
Equities markets have suffered in recent months following the uncertainty
surrounding Eurozone sovereign debt. With mixed economic signals emerging from
the U.S., particularly the lack of improvement in employment figures, investors
are nervous about the persistence of the global recovery.
"The poor performance of equities has affected Irish pension funds" added
Delaney. "The Hewitt Managed Fund Index, an indicator of the performance of
traditional Irish Pension Managed Funds, fell by 3.4% in the last 3 months. This
has reduced the gains made earlier in the year, and the average managed fund is
now up just 2.5% since the start of 2010."
German and French bond yields fell significantly over the quarter as investors
sought a safe haven from the riskier sovereign debt of the peripheral Eurozone
countries. "The decline in bond yields has led to an increase in the
liabilities of the Defined Benefit schemes," Delaney said. "Coupled with
falling equity markets, pension schemes need to be wary of falling back into
The difficulties in Europe has led to a decline in the value of the euro against
all the major currencies. This has helped to boost the returns from non-Eurozone
markets since the start of the year.
For the year to date, global equities have increased by 5.9% while Eurozone
equities have fallen by 8.1%. Eurozone bonds have returned 3.2% and the Hewitt
Managed Fund Index shows that the average pension fund has gained 2.5%.