Pension funds on rise again

AFTER three years of major losses, world share prices have begun to recover, boosting pension fund performances in their wake.

Having lost nearly 50% of their value since the markets started to slide in early 2000, share prices have begun to recover some of the lost ground as investors start to buy back in to the various stock markets, raising prices from historic lows.

That boost to markets is reflected in pension fund returns moving into positive territory after years of falling returns. Overall the lift in share prices has led to a 9% rise in the average Irish Pension Managed Fund in the second quarter of 2003. However, over a five-year timeframe most funds are still seriously under-performing due to the market shakeout since the hi-tech crash in 2000.

New statistics from Mercer Investment Consulting show a sharp divergence in fund management performance. Irish Life and Acorn were the top performing funds over the second quarter with returns of 11.4% and 10.5% respectively. The average return over the three months was 9% and against that measure Irish Life Global Access at 7.5%, AIBIM and Eagle Star (both returning 8.1% growth) were the worst.

Irish Life, up 5.4%, and Friends First/F&C, up 4.6%, were the highest-ranking funds in the first six months of 2003 and were modestly better than the average return of 3.7%. Worst performers over this period were KBC Asset Management and Standard Life returning 2.7% and 3.0% respectively.

“Equity markets over the second quarter recovered strongly from the losses witnessed in the early months of the year, buoyed by the reasonably swift conclusion to the war in Iraq, further ECB and Fed interest rate cuts, as well as some signs of improving economic fundamentals,” said Grainne Alexander, senior investment consultant at Mercer.

Despite the recent strong gains, medium-term fund returns remain in negative territory.

Over the 10-year period, declines in the last three years are overshadowed by double-digit growth in the late 1990s. The average return shows a gain of 8.8%, but the huge market returns of the last US boom are not likely to recur and experts say pension funds will struggle to deliver adequate returns.