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Irish pension funds do well in August

Monday, September 01 16:33:42

Irish pension funds performed strongly in August, the latest Aon Hewitt Managed Fund Index shows.

It increased by 2.9pc in August, which contributed to the index delivering a positive return of 10.5pc since the beginning of the year.

Global equity markets rose in August, with the FTSE World Index increasing 3.9pc in euro terms. The S and P 500 index closed above 2,000 for the first time towards the end of August, as data on durable goods and consumer confidence boosted optimism in the economy's strength. The continued decline in the Euro over the summer months also boosted returns for Euro investors in overseas assets, and the Euro fell to its lowest level in almost a year versus the dollar.

"Despite concerns about the continued fighting in Ukraine, Israel and Syria, market valuations, and the poor economic growth figures in the Eurozone, markets produced positive returns in August," said Denis Lyons, Investment Consultant with Aon Hewitt. "Investors reacted positively to speculation that the ECB may introduce further stimulus measures to counter the risk of deflation."

Eurozone government bonds experienced a strong month again in August. The German 10 year Bund yield hit a record low to finish at 0.89pc, a decrease of 30 bps over the month, while the French 10 year bond yield fell 32 bps to 1.25pc. Peripheral Eurozone bond yields also fell over the month with the Irish 10-year bond yield falling 46 bps to 1.78pc.

"Irish Defined Benefit pension schemes will have seen the valuation of their liabilities increase again in August given the continuing fall in core Eurozone government bond yields. This may have led to a fall in funding levels for more mature schemes, as strong growth asset performance may not have fully compensated for the increase in the valuation of scheme's liabilities," added Mr Lyons.

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