Irish pension managed funds delivered further positive returns during August, with a mean gain of 2.9% for the month.
Rubicon Investment Consulting reports that Setanta Asset Management took top spot with a return of 3.6% for the month, while New Ireland propped up the league table with a return of 2.1%.
Managed funds have returned 9.7% on average over the first eight months of 2014. Setanta Asset Management delivered the strongest return over the year to date at 10.7%, while Merrion Investment Managers produced the weakest return, returning 8.4% over the same period.
Over the past twelve months, the average fund return was 17.7%. Returns for the year ranged from 19.7% (Standard Life Investment Managers) to 15.9% (New Ireland).
The average managed fund return has been a healthy 15.6% per annum over the past three years. The five-year average return is very strong, at 10.8% per annum. Irish group pension managed fund returns over the past ten years have been 5.9% per annum on average.
The Aon Hewitt Managed Fund Index, an index representing the performance of traditional Irish pension managed funds, increased by 2.9% in August. This has contributed to the index delivering a positive return of 10.5% since the beginning of the year.
Global equity markets rose in August, with the FTSE World Index increasing +3.9% in euro terms. The S&P 500 index closed above 2,000 for the first time towards the end of August, as data on durable goods and consumer confidence boosted optimism in the economy's strength. The continued decline in the Euro over the summer months also boosted returns for Euro investors in overseas assets, and the Euro fell to its lowest level in almost a year versus the dollar.
"Despite concerns about the continued fighting in Ukraine, Israel and Syria, market valuations, and the poor economic growth figures in the Eurozone, markets produced positive returns in August," commented Denis Lyons, investment consultant with Aon Hewitt. "Investors reacted positively to speculation that the ECB may introduce further stimulus measures to counter the risk of deflation."
Eurozone government bonds experienced a strong month again in August. The German 10 year bund yield hit a record low to finish at 0.89%, a decrease of 30 bps (basis points; 0.3%) over the month, while the French 10 year bond yield fell 32 bps to 1.25%. Peripheral Eurozone bond yields also fell over the month with the Irish 10 year bond yield falling 46 bps to 1.78%.
"Irish Defined Benefit pension schemes will have seen the valuation of their liabilities increase again in August given the continuing fall in core Eurozone government bond yields. This may have led to a fall in funding levels for more mature schemes, as strong growth asset performance may not have fully compensated for the increase in the valuation of scheme's liabilities," continued Lyons.
LCP Ireland says in a commentary that "global equities increased strongly by 3.9% over the month. Long dated AAA Eurozone bonds were also strong in August as bond yields fell for an eight month in a row.
The funding level of a typical DB scheme increased by approximately 1.2%, as assets increased more than liabilities.
All of our sample DC schemes rose in August as every asset class had positive returns."