Irish pension managed funds delivered positive
returns during May, with a mean gain of 2.6% for the month. Friends First/F&C
and Standard Life Investments shared top spot with returns of 3.0% for the
month, while Merrion Investment Managers propped up the league table with a
return of 2.2%. Managed funds returned 4.9% on average over the first five
months of 2014. Setanta Asset Management delivered the strongest return over the
year to date at 6.1%, while Prescient Investment Managers and Merrion
Investment Managers produced the weakest returns, returning 3.5% over the same
period.
Over the past twelve months, the average fund
return was 11.3%. Returns for the year ranged from 13.7% (Standard Life
Investments) to 9.7% (Prescient Investment Managers).
Fiona Daly, Rubicon Investment Consulting managing
director, commented: "The average managed fund return has been a
healthy 10.3% per annum over the past three years. The five-year average return
is very strong, at 11.7% per annum. Irish group pension managed fund
returns over the past ten years have been 5.5% per annum on average,
compared with the Irish inflation rate of 1.5% per annum over the same time
horizon. All of the managed funds surveyed outperformed inflation over this
period."
LCP Ireland
said in its May report that global equities increased by nearly 4% over the
month. Long dated AAA Eurozone bonds also rose in May as bond yields fell for a
fifth month in a row.
The funding level of a typical DB (defined benefit) scheme increased by
approximately 1.4%, as assets increased more than liabilities.
DC (defined contribution) schemes with a high allocation to growth assets
performed best in May.
The Aon Hewitt Managed
Fund Index, an index of traditional Irish pension managed funds,
increased by 2.72% in May. This has contributed to the index delivering a
positive return of 6.05% since the beginning of the year.
Global equity markets rose in May with the FTSE All World Index increasing +3.9%
in Euro terms. Japan was the best performing region in Euro terms, as the FTSE
Japan Index returned +5.8%.
The S&P 500 Index posted a number of fresh record highs towards the end of May
as global stock markets strengthened on positive economic data and indications
that the US Federal Reserve is in little hurry to raise interest rates. This
coupled with market focus on expected European Central Bank monetary easing
fuelled market gains.
"Equity markets have strengthened on the expectation that the ECB will loosen
monetary policy further following the meeting on the 5th of June in an effort to
spur higher inflation in the region. Eurozone government bonds also benefitted
from this expected policy, as government bond yields moved even lower over the
month," commented Cathal Fehily, investment consultant
with Aon Hewitt.
Eurozone government bonds experienced a strong month again in May, encouraged by
expected accommodative monetary conditions. The German 10 year Bund yield fell
11 basis points (bps) to 1.36% while the French 10 year yield fell 18 bps to
1.77%. Peripheral Eurozone bond yields also fell over the month in line with
core yields.
"Irish defined benefit pension schemes will have seen their liabilities rise
again in May given the fall in core Eurozone government bond yields. However,
strong asset performance over the month should compensate for this increase in
liabilities and schemes will generally see a small improvement in their funding
levels," added Fehily.
