Having declined 2.6% during 2007, Irish pension funds continued to struggle during January, with the average fund declining a further 6.7% over the month.
This represents the largest fall in a single month since September 2002. Setanta Asset Management were the best performing manager over the month with a return of -5.2%. Friends First/F&C delivered the weakest performance over the month, declining 7.7%.
Irish pension funds have now lost almost 10% of their value over the past twelve months. As a result of these recent losses, the average managed fund has shown a gain of just 6.9% per annum over the past three years. The five year returns to the end of January, however, remain strong, with the average managed fund delivering a return of 9.8% per annum over this period.
Returns over the past ten years have been a disappointing 5.0% per annum on average. When considering these returns it is important to remember that the investment horizon of most pension schemes is generally over 25 years, and that equities have historically provided significantly higher returns over the long-term than bonds, property or cash, although at the cost of greater volatility.
Market Update
Fiona Daly, Managing Director of Rubicon Investment Consulting commented: January was an exceptionally volatile month across global equity markets. Once again, concerns over uncertainty in the US sub-prime mortgage market, tight credit conditions and worries over the US economy and its global implications continued to spook investors worldwide.
In the US, growing concerns emerged that the economy is slipping into a recession, with 2007 being the weakest year for consumer spending since 2002, while the unemployment rate rose to a two-year high of 5.0%. The Federal Reserve cut interest rates on two occasions during January. An emergency cut of 0.75% a week before its scheduled meeting was designed to calm markets following heavy losses. This was the largest single cut in interest rates since 1982 and the first emergency cut since the September 11th terrorist attacks. A further 0.5% cut followed at their scheduled meeting a week later. US interest rates now stand at 3.0%, compared with 4.25% at the start of the year.
Markets were given a further boost with President Bush announcing a $150 billion fiscal stimulus package to help soften the US economic slowdown and boost consumer spending. Both the ECB and the Bank of England held interest rates, at 4.0% and 5.5% respectively. Despite the continued hawkish commentary from the ECB, it is believed that Eurozone interest rates are at their peak, and may be cut later in the year. In France, Société Générale announced that it had uncovered €50 billion of unauthorized trading activity by a single rogue trader, which resulted in losses of €4.9 billion. The closing out of this position exacerbated market volatility, with European equities posting their largest single day loss since September 2001 on Monday 21st January, followed on Thursday 24th by the largest one-day gain since March 2003.
Group Pension Managed Fund Returns to 31 January 2008
|
|
1 Month
% |
1 Year
% |
3 Years
% p.a. |
5 Years
% p.a. |
10 Years
% p.a. |
|
AIB Investment Managers |
-7.1 |
-7.0 |
8.9 |
10.8 |
4.6 |
|
Bank of Ireland Asset Management |
-5.8 |
-13.3 |
3.6 |
7.5 |
5.2 |
|
Canada Life/Setanta |
-5.2 |
-7.9 |
6.3 |
9.5 |
4.5 |
|
Eagle Star |
-6.5 |
-6.6 |
8.8 |
11.2 |
5.6 |
|
Friends First/F&C |
-7.7 |
-11.0 |
6.7 |
9.8 |
4.6 |
|
Hibernian Investment Managers |
-7.2 |
-9.3 |
6.8 |
9.9 |
5.3 |
|
Irish Life Investment Managers |
-6.7 |
-10.2 |
7.2 |
10.8 |
5.4 |
|
KBC Asset Management |
-7.6 |
-13.2 |
6.0 |
8.5 |
3.7 |
|
Oppenheim Investment Managers |
-5.3 |
-7.3 |
7.7 |
10.2 |
7.2 |
|
Standard Life Investments |
-7.6 |
-12.1 |
6.9 |
10.2 |
4.2 |
|
Average |
-6.7 |
-9.8 |
6.9 |
9.8 |
5.0 |
