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News : Irish Last Updated: Jun 7, 2012 - 8:51 AM

Irish pension fund returns fell in May 2012
By Finfacts Team
Jun 7, 2012 - 4:39 AM

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Irish pension managed funds fell in May 2012, with an average return of -2.1% for the month.

Setanta Asset Management took top spot with a return of -1.3% for the month, while Irish Life Investment Managers propped up the league table with a return of -2.9%. Over the first five months of 2012, managed funds have delivered a 4.9% return on average. Over this period, the top performing fund was that of Standard Life Investments, which returned 7.1%.

The worst performing fund over the first five months of the year was that of Irish Life Investment Managers, which returned 2.8%. Over the past twelve months, the average fund return was 0.8%. Returns for the year ranged from 4.5% (Setanta Asset Management) to -4.3% (Irish Life Investment Managers).

Fiona Daly, managing director of Rubicon Investment Consulting commented: "The average managed fund return has been a healthy 9.2% per annum over the past three years. The five year returns are all negative however, with an average return of -3.9% per annum over this period.

Irish group pension managed fund returns over the past ten years have been a disappointing 2.2% per annum on average, just above the Irish inflation rate of 2.0% per annum over the same time horizon. Less than half of the managed funds surveyed outperformed inflation over this period."

Eurozone equities were once again hit hard, falling -7.0% in May. Developments in Spain weighed heavily on the single currency area as the countries financial system came under severe pressure prompting Spanish lender Bankia to request a €19bn state bailout.

"Eurozone equities started 2012 strongly but have since given up those gains and are now negative year to date," commented Evelyn Ryder, investment director at Aon Hewitt. "Markets seem to be pricing in the increased likelihood of a potential Eurozone break up with the term 'Grexit' being coined by many," added Ryder. "Irish pension schemes can take some solace in the fact that the weakening Euro will have mitigated losses experienced in other markets somewhat," continued Ryder. The EUR/USD moved from 1.32 at the start of the month to 1.24 at month's end.

The uncertainty in markets can be seen in the VIX index, commonly referred to as the Fear Gauge, which jumped from 16.6 to 24.0 over the month of May, which is an increase of over 40%. This evident fear has resulted in a clear risk off trade with perceived safe haven assets rallying markedly. German bund and US treasury yields fell dramatically in the flight to safety. German 10 year bund yields are now at an historic low of 1.15%.

"Irish defined benefit pension schemes funding levels will have come under renewed strain in May. Falling asset values and decreasing bond yields, raising liability values, both served to negatively impact scheme funding levels," commented Ryder. "Those schemes with allocations to high grade government bonds will have best matched the increased cost in their liabilities as core Eurozone bond yields decreased significantly over the month," added Ryder.

The Aon Hewitt Managed Fund Index, an index of traditional managed pension funds fell by -2.0% in May. Despite the poor performance of the Index over the last month, the Index has delivered a positive return +4.9% since the start of 2012.

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