The Aon Hewitt Managed Fund Index, an index representing the performance of traditional Irish pension managed funds, increased by 1.6% in May. This has contributed to the index delivering a positive return of 13.0% since the beginning of the year and 24.1% over the past 12 months. Rubicon Investment Consulting report (see below) that its portfolio of funds achieved an average return of 1.8%.
Aon Hewitt said that over the month of May, global equity market returns were positive in euro terms with the FTSE All World returning 2.2% despite uncertainty over Greece weighing on markets and the US economy reporting a first quarter contraction in GDP growth according to a revised estimate. The MSCI Emerging Markets Index was the worst performer in euro terms (-1.9%) while the ISEQ Index was the best performer in euro terms (+4.2%).
"Global market returns were positive over the month of May, despite volatile bond markets, disappointing US economic data and concerns over the Greek crisis. The positive returns for euro investors were also aided by continuing euro weakness,", commented Darragh Gavin, investment consultant at Aon Hewitt.
Core Eurozone bond yields increased over the month with the German 10 year bond yield finishing at 0.49%, an increase of 13 bps (basis points). The French 10 year bond yield increased 16 bps to 0.81%. The peripheral Eurozone government bond yields also increased over the month. The Portuguese 10 year bond yield increased 24 bps to 2.33%, and the Italian 10 year bond yield increased to 1.85%, an increase of 37 bps.
"Irish Defined Benefit pension schemes will have seen an improvement in their funding positions. This improvement is due to positive asset returns coupled with a decrease in the value of their liabilities due to the continued rise in bond yields," added Gavin.
Rubicon Investment Consulting said taht Irish pension managed funds delivered positive returns on average during May, with the average gain of the funds surveyed being 1.8%. Zurich Life were ranked top this month with a return of 2.4%, while New Ireland propped up the league table with a return of 0.9%. The first five months of 2015 have seen very strong pension managed fund returns, with a survey average of 13.8%.
Merrion Investment Managers top the table over the year to date with a return of 17.3%, while Setanta Asset Management produced the lowest return at 11.9%. Over the past twelve months, the average fund return was 25.5%. Returns for the year ranged from 32.3% (Merrion Investment Managers) to 19.1% (New Ireland), representing a difference of over 13% between the best and worst performing funds over the past twelve months.
The average managed fund return has been a very strong 18.6% per annum over the past three years. The five-year average return is a healthy 12.8% per annum. Irish group pension managed fund returns over the past ten years have been 6.6% per annum on average.
LCP Ireland commented: "The funding level of a sample DB scheme increased back above 100% as liabilities decreased in May due to the impact of rising bond yields.
DC strategies with a higher allocation to equities performed best in May whereas strategies with a higher bond allocation fell in value" — see commentary.