Strong equity markets towards the end of the year saw Irish managed pension funds record growth of almost 22 per cent in 2005.
The 21.6 per cent average return by funds in the Irish market was the best since 1997. However, falling long-term interest rates mean fund liabilities also rose sharply in 2005.
"Pension funds have experienced better times in 2005," said Tom Geraghty, head of Mercer Investment Consulting. He said global stock markets had benefited from good corporate results during the year and ongoing activity on the merger and acquisitions front.
The price of oil was also a key factor driving equity prices last year, noted Rubicon Investment Consultants managing director Fiona Daly, with prices rising from $42 a barrel at the start of the year to a high of more than $70. The decline in prices towards a year-end $61 a barrel was a factor in the stock market rally that saw pension funds grow by an average of about 3.5 per cent in both November and December.
Allowing for the rise in liabilities, Derek McNamee of investment consultants Heissmann estimates that Irish pension funds were, on balance, 6 per cent better off at the end of the year, which will prove welcome news to companies now required to list pension fund deficits on their balance sheets.
KBC Asset Management (KBCAM), which has had a torrid time in recent years, finished the year strongly. Its 4.2 per cent gain was the best return in December and it ranked second in the final quarter of 2005 with a return of 5.9 per cent.
Standard Life, whose 6.1 per cent return led its peers over that final quarter, also topped the table for 2005 as a whole, with a gain of 23.9 per cent against an average of 21.3 per cent. Irish Life, which had been the best performer in the previous two years, was second with growth of 23 per cent.
Canada Life was the laggard in the last three months of the year with a return that was barely half that of Standard Life - 3.1 per cent - and well short of the industry average of 4.9 per cent.
Over 2005 as a whole, Bank of Ireland Asset Management remained at the wrong end of the table with a return of 18 per cent, appreciably lower than the 19.5 per cent returned by the second-worst group, Hibernian Investment Managers.
The bullish performance in 2005 lifted the three-year average return by Irish pension funds to 14.7 per cent per annum. Irish Life's 16.7 per cent average annual return kept it ahead of its peers over this period, with BIAM again propping up the table with 13.2 per cent annual average growth.
The five-year figures, which reflect the full impact of the bursting of the technology bubble, show an annual average gain of just 2.8 per cent. However, the strong end to 2005 means that all funds are now in positive territory over the period, with KBCAM recording a fractional 0.5 per cent per annum gain against 4.3 per cent from Irish Life and BIAM, which are the outperformers over the period.
Over the longer, 10-year period, Oppenheim Investment Managers are best with a 12.8 per cent average annual gain, well ahead of second-placed New Ireland with 11.4 per cent and almost 50 per cent better than KBCAM's annual growth of 8.9 per cent over the period.
