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Pension fund losses this year wipe out gains from as far back as 2005 (Irish Times)

04 November 2011

Dramatic losses in Irish pension funds this year have wiped out gains made by pension funds as far back as the middle of 2005.

Irish group-managed pensions lost a further 3.5 per cent on average in July, bringing their accumulated losses in 2008 to 16.9 per cent. Pension funds have made gains in only two months this year, and one of those was fractional.

Of greater concern to pension fund members and trustees is that, according to figures supplied yesterday by Rubicon Investment Consulting, the current stock market volatility has wiped out the gains of the previous two years.

At the end of July, the average Irish pension fund had lost 0.3 per cent over each of the last three years. This is despite gains of 13.1 per cent in the 12 months to July 2007 and 10.2 per cent over the previous 12-month period.

Losses of 20.6 per cent on average over the past 12 months have effectively offset those gains, leaving pension funds worse off than they were in the middle of 2005 - and that is before allowing for the impact of inflation in the intervening period.

Over the 10-year timeframe, which is seen as more relevant for long-term savings such as a pension, the average Irish fund manager has recorded an annual gain of just 2.6 per cent - significantly short of consumer price inflation, which averaged 3.6 per cent over the same period.

Even the strongest Irish fund manager over that period - Oppenheim, which was recently acquired by Merrion Capital - has gains of only 4.7 per cent per annum over the last decade, less than one percentage point ahead of inflation.

In a month when every fund manager stayed in the red, Setanta/Canada Life had the best return - a loss of 1.1 per cent. That was well ahead of its nearest rival and just one-third of the 3.3 per cent loss recorded in July by Hibernian Investment Managers (HIM).

The relative outperformance means Setanta is now the strongest performer so far in 2008 and over the last 12 months. Friends First/F&C's 19.6 per cent loss is the worst among its peers in 2008, while KBC Asset Management has lost 23.9 per cent over the 12-month period.

Eagle Star continues to be the strongest fund manager over the three- and five-year periods, with annual gains of 1.9 per cent and 7.3 per cent respectively. Bank of Ireland Asset Managers, with a loss of 3.1 per cent per annum over the last three years but annual gains of 3.4 per cent over the five-year period, is the weakest performer in those categories.