Pensions deliver decade-best growth of 20.6% in 2019

Irish pension funds delivered bumper returns in 2019, making it the best year for investment returns in a decade.

The value of the average Irish active managed fund increased by a fifth over the 12 months, according to Rubicon Investment Consulting, with a return of 20.6 per cent. Zurich Life, which was the best performing fund over the period, reported gains of 23.9 per cent and even Setanta Asset Management, which was the laggard of the seven managed fund providers reviewed, saw growth of 16.1 per cent.

The year marked a strong rebound from 2018, which had been the worst for Irish pension fund investors in the previous 10 years, as all funds lost ground and the average loss coming to 5.2 per cent.

Strong gains in the first quarter of the year saw the average Irish fund gain over 10 per cent – more than recovering from an unusual December market slide in 2018 that had knocked 6 per cent of fund values.

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For the rest of the year, the funds reported solid gains apart from a 4 per cent setback in May and a slight correction in August and October, according to Rubicon.

The year closed with an average gain of 0.9 per cent in December. New Ireland topped its peers with a 1.4 per cent gain on the month and Merrion Investment Managers propped up the table with an advance of just 0.2 per cent.

Market leading gains

December aside, Zurich has delivered the strongest returns in the market over the final quarter and the second half of the year, with Merrion consistently delivering the weakest performance.

Over the medium term – three and five years – Zurich reported market leading gains of 8.6 per cent per annum against average managed fund returns of between 7 and 7.3 per cent per annum. Merrion, by comparison, was delivering just over half that growth with gains of 4.3 per cent annually over the past three years and 5 per cent each year over the five years since 2015.

Long-term performance is the critical issue for pensions as people can have their savings invested for up to 40 years or even more. Rubicon has figures for the past 20 years, showing that the average annual return over the period was 4.7 per cent. That covers a period that includes the heady years of the Celtic Tiger and the subsequent markets crash and recession.

Setanta's average of 5.4 per cent annual growth over the past two decades is just ahead of Zurich's average of 5.2 per cent. Both are well ahead of Friends First/BMO and Davy Asset Management, whose active managed funds have delivered annual growth of 4 per cent and 4.2 per cent respectively since the start of the century.