Value of managed pension funds dips 10%

The value of Irish-managed pension funds fell by an average of 10 per cent in the second quarter of the year with those worst affected slipping by as much as 12.5 per cent in plummeting global stock markets.

The latest data on managed pension funds released by Mercer Investment Consulting yesterday show the second-quarter performance by the funds was the third worst quarterly performance in the past decade.

Bank of Ireland Asset Management was the best performer but still dipped by 6.8 per cent while, in second place, New Ireland saw value fall by 7.3 per cent.

Worst affected was KBCAM which fell by 12.5 per cent while second from the bottom, AIBIM, fell by 11.7 per cent.

Mr Tom Murphy, head of Mercer Investment Consulting in Ireland, cited tumbling markets as the main contributor.

He said around 70 per cent of all Irish-managed pension funds were invested in equity markets around the world. Of that, 15 per cent is invested in Irish stocks.

Global equity markets fell by 19.5 per cent in the quarter - losing 11.1 per cent in June alone - while Irish markets fell by 7.9 per cent in the quarter.

Of the remaining 30 per cent of managed pension funds, 25 per cent is invested in bonds which had done "reasonably well with a return of 3.8 per cent", according to Mr Murphy. The remaining 5 per cent is invested in property which is expected to be "broadly flat", he said.

"Most managers feel that the fundamentals of the equity markets are positive but there is a fear factor out there that people are reacting to, or rather over-reacting to, as managers would argue," he said.

Revelations of fraud, reliablity of accounting earnings and heightened geo-political risks had all weighed heavily on world markets, he said.

"There appears to be no let-up for investors at the moment, with markets ignoring positive information flows preferring instead to concentrate on recent high-profile corporate governance issues."

Last quarter's pension fund losses represented the third-largest quarterly fall in 10 years surpassed only by a 14 per cent fall in the third quarter of 2001 and a 12.4 per cent slump in the third quarter of 1998.