Pension funds turn in strong third-quarter performance

PENSION fund managers had a strong third quarter with the average fund growing by 5.6%, according to industry figures published yesterday.

Investment consulting firm Hewitt said pension funds had risen by an average of 15.3% so far this year on the back of a positive three months between June and September.

Funds grew in value by an average of 3.4% in September alone.

The top performer over the year so far was the Canada Life/Setanta Asset Management fund, which was worth 18.1% more in September than at the start of the year.

Montgomery Oppenheim took the top slot over the last three months, adding 6.9% in the third quarter alone, while AIB Investment Managers had the best performance over the month of September, with its managed fund adding 4%.

Hewitt said all equity markets advanced in the third quarter despite "significant" economic shocks, such as the twin hurricanes, Katrina and Rita, which hit the southeastern United States and helped bump up oil prices to new records of more than $70.

A similar report from fellow investment specialists Mercer said yesterday that investments in oil companies had benefited from higher oil prices and that the resources sector was now heavily favoured by fund managers.

But Hewitt said the Federal Reserve's decision to keep edging up short-term interest rates had hurt the performance of American equities.

North American markets turned out to be the poorest performer for Irish fund managers over the quarter, gaining an average of 5% over the quarter in euro terms and 3.2% in the month of September.

But there was bad news from Ireland, which was the second-worst performing market. Hewitt's Anita Graham said: "Managers that held an overweight position in Irish equities were hit, especially the likes of Bank of Ireland Asset Management (BIAM), who in addition to being overweight in Irish equities, did not hold Elan - the top-performing constituent over the period."

BIAM, which has leaked pension fund clients on the back of a sub-par performance in recent months, added just 2.5% in September, falling short of the average gain of 3.3% for the month.

Its quarterly gain of 3.5% compared unfavourably with the 5.6% average gain for the period.

"This poor performance comes at an inopportune time, particularly for BIAM who are currently struggling with staff turnover and significant client losses, and surely this recent performance will only further serve to compound their asset outflows," Hewitt said.