Irish pension fund value rises by 12.6%

THE value of Irish pension funds rose by 12.6% to almost €88 billion in 2006.

A survey of fund managers by the Irish Association of Pension Funds (IAFP) found that over the last five year the value of assets in pensions has increased from €44.8bn to €87.7bn.

IAPF chairman Joe Byrne said the rise in the value of pension funds comes despite the recent stock market turbulence.

“Over the 10 years to the end of February 2007, the average managed fund return was 9% per annum, and that included three consecutive years when equity markets declined,” he added.

IAPF members have invested €9.7bn in Irish equities. However, Irish equity content of the typical fund decreased by 0.4% over the year, from 11.4% at December 31, 2005 to 11.0% at the end of 2006.

Property, as a proportion of the overall pension fund assets, increased by from 8% to 9% in 2006.

The increase is reflected in the fall of the equities portion of the average pension fund which fell to 63.4% in 2006 from 65% in 2005.

The IAPF said the drop may “camouflage” a more significant strategic move away from equities as, given the outperformance of equities relative to other asset classes during 2006, this proportion could have been expected to increase to around 68% based on performance alone.

Eurozone equities, which includes Irish stocks, accounted for 45% of overall equity holdings. Exposure to British equities fell to 6.1% from 7.7%, while investments in US equities fell from 16% to 13%.

Exposure to Japanese and other European equities remained largely unchanged over the year. Pacific and other regional equity holdings increased to 8.3%.

Cash and other short-term instruments increased from 4.5% to 5.5%.

The IAPF said there are signs that fund managers are increasing their exposure to alternative investments. These assets tripled from 0.8% at the end of 2005 to 2.4% at the end of 2006.

Forestry accounted for 0.2%, 0.1% is in private equity, 0.5% in direct currency holdings, 0.2% in tactical asset allocation, 1% in derivatives used for hedging and 0.5% in derivatives used for other purposes.