Pension funds rise by 12% to €62.5bn

PENSION funds increased in value by 12% last year to €62.3 billion, according to a new survey from the Irish Association of Pension Funds (IAPF).

The IAPF survey of asset allocation found the value of funds rose because of the “positive market environment” and inflows to support the solvency of pension funds.

“The 2004 asset allocation survey revealed some interesting trends. In recent years IAPF have seen a steady increase in funds moving to passive management,” said IAPF investment committee member Fiona Daly.

“Through 2004 this trend continued. By year end the proportion of assets under passive management rose to 25.8% compared with 17.9% at the end of 2003.”

The amount invested by the funds in Irish equities was little changed year-on-year, rising by just 0.2% to 12.2% of total assets.

But the IAPF said Irish shares were the best performing, gaining 29% in value.

Funds held 17.5% of their assets in Eurozone equities at the end of last year, unchanged from 2003. As a result, Irish equities represent 41.1% of total Eurozone equity holdings compared with 40.6% the previous year.

Exposure to Britain, America and the rest of Europe remained largely unchanged over the year. Japanese equity holdings increased by 0.6% to 3.6%, with a reduction in Pacific Basin holdings from 3.1% to 2.7% by year end.

The overall proportion held in fixed interest and index-linked stock was unchanged at 23.5% at the end of 2004.

Equities outperformed bonds by around 3%, though the unchanged weightings in equities and bonds actually disguises a moderate shift of monies out of equities and into bonds, as pension fund trustees look to address funding problems arising out of the equity bear market during the early 2000’, the IAPF said.

Over the year the property content was trimmed back from 8.7% to 7.4%. Cash and other short term instruments increased from 3.8% to 4.7% of overall funds at year end.