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Weak start to 14 for Irish pension funds

Tuesday, February 04 12:00:40

This year got off to a poor start for Irish managed pension funds but last year saw an average annual return of 14.09pc, according to the latest Aon Hewitt Managed Fund Index.

The index of traditional Irish pension managed funds, decreased by -0.59pc in January. This has contributed to the index delivering a positive return of 14.09pc in the past 12 months.

Global equity markets declined in January with the FTSE All World Index falling -1.9pc in euro terms. Risky assets have had a disappointing start to the year, driven by weaker than expected Chinese PMI data and the US Federal Reserve lowering its monthly asset purchases from $85 billion per month to $65 billion per month.

Emerging market currencies also came under pressure this month but stabilised somewhat following central bank action in a number of countries. Emerging Markets and Pacific Basin ex Japan were both weak in January, down -4.5pc and -3.3pc respectively in euro terms. North America performed better in both local terms (-0.4pc) and euro terms (-1.3pc) following solid GDP growth reported in Q4.

"Stock markets have experienced sharp falls in recent days following heavy losses in Asia and on Wall Street. 2014 is shaping up to be a much more challenging year for investors. Developing markets for example, which now account for a 50pc share of global GDP, are suffering as the US Federal Reserve begins cutting back on its asset purchase programme," said Brian Delaney, Investment Consultant with Aon Hewitt.

Core Eurozone Government bond yields fell during the month of January. The German 10 year Bund yield was down 37 bps to 1.57pc. The French 10 year yield fell 20 bps to 2.23pc, while the Dutch 10 year yield fell 36 bps to 1.87pc. Peripheral Eurozone Bond yields also fell over the month, with the Italian and Spanish 10 year bond yields decreasing 37 bps and 48 bps respectively to 3.77pc and 3.66pc. The Irish 10 year bond yield slipped 16 bps to 3.31pc.

"Irish Defined Benefit Pension Schemes will have seen their liabilities rise in January given the fall in core yields. Negative performance from growth assets has also had a negative impact on schemes, and schemes will generally see a fall in their funding level," continued Delaney.