€10 billion wiped of value of pension assets this year

IRISH pension funds have fallen by 10% so far this year representing their biggest drop since the aftermath of the September 11 attacks.

The fall means €10 billion has been wiped off the value of pension assets over the last few weeks.

The figures, compiled by Mercer Investment Consulting, is unwelcome news for trustees and members of such funds especially following a decline of about 4% in the value of the average Irish pension fund in 2007.

Last year was one of the weakest years for pension funds which returned a negative -3.7% for the year and ended four years of double digit returns.

In 2006, Irish pension funds grew 12.6% to €87.7bn according to Mercer.

Despite the 10% drop this year Mercer has cautioned trustees against taking rash decisions in response to the market volatility.

Worldwide partner and head of investment consulting at Mercer Tom Geraghty said: “What is needed is a measured reassessment of investment strategy against current market and economic conditions. Pension fund investment strategy is set with a long-term framework in mind, and implementation of any strategic change requires careful planning.

“We have seen such volatility in equity markets in the recent past and those investors who resisted the temptation to make any knee-jerk reactions ultimately fared better in the long run.

“The temptation is strong but I would urge against trying to ‘time the market’ by making daring investment calls. History has shown that such a strategy just doesn’t pay off.”

Mr Geraghty added that there is no doubt that we have entered a period of fear in the markets.

“Sentiment is as negative as we’ve ever seen and everyone is convinced that recession is upon us. The brave investor who follows a contrarian view and invests accordingly may well gain from the current market fear and volatility,” he added.