Outlook good as pension funds shoot ahead by 9%

PENSION funds have shot ahead by 9% in the first six months of the year, one of the country’s biggest fund managers said yesterday.

Irish Life Investment Managers, which manages assets worth more than €22 billion, said that pension funds had delivered solid returns so far and that the outlook for the rest of the year was good.

Its mid-year report, which was published yesterday, said equities and property would remain the best investments and would deliver better returns than cash or bonds.

“Our view is that, for medium- and long-term investors, there is greater potential in equities and commercial property rather than cash or bonds, and they remain our assets of choice,” said the head of asset allocation, Eugene Kiernan.

Mr Kiernan said that the investment outlook was favourable.

Interest rates would remain low while company profitability would improve, he said. This would build on an already strong performance by stock markets, property and government bonds.

There was also good news for eurozone investors with US dollar-based investments, such as shares in American companies, who benefited from a recovery in the dollar against the euro that meant their investments were worth more in euro terms.

Mr Kiernan said that shares in Irish companies had risen thanks to a view in the investment community that Ireland would remain one of the world’s fastest-growing economies.

Banks had been seen as a particularly good bet because their profits were being boosted by consumers and businesses borrowing more.

“But it is not all based on the strength of the domestic economy, with other stocks doing well because of their ability to be among the best players in their sector globally,” said Mr Kiernan.

Equities would remain attractive because interest rates were unlikely to increase, he added.

“Our long-held view on eurozone interest rates has been that they are going nowhere and we are sticking with this.

“There is also a sense that, in the UK, the upward shift in interest rates is substantially over, while in the US we are also closer to the end of the rate cycle,” said Mr Kiernan.