IRELAND - Irish pension funds are thought to have lost in the region of €4bn in 2007, driven largely by exposure to local equities, according to consulting firm Mercer.

Data compiled for the consultancy suggests the average Irish managed pension fund saw a negative return of -3.5% in the 12 months to December 31, 2007 because the average scheme has around 15% exposure to the Irish equity index ISEQ, which also saw a negative performance of -24.5% over the year.

Rising bond yields helped to rally the equity losses somewhat, said Tom Geraghty, head of Mercer's investment consulting business in lreland, but schemes whose funding evaluations were completed towards the end of year are likely to have been better off.

"While 2007 was a difficult year for pension funds, there are some valuable lessons for trustees and members alike as we face into another year," noted Geraghty.

"The volatility inherent in equity investment was sharply illustrated last year, and this is likely to continue, particularly while uncertainty continues regarding the scale of the credit problems. Such an environment heightens the need for pension fund trustees to fully understand the risks inherent in their investment portfolios and seeks to be as diversified as is possible," he added.

Mercer had previously noted Irish pension funds were hardest hit in November because the Irish stockmarket has a high exposure to financial and housing-related stocks -markets which are beginning to suffer in Ireland either as a result of reduced demand for housing or because of the global credit crunch. (See earlier IPE story: Irish funds see 2007 returns wiped out)

On the back of this performance, just two group pension managed funds saw a positive return in 2007 - from Allied Irish Bank IM and the Eagle Star balanced fund, delivering 1.3% and 0.6% respectively.

Similarly, Eagle Star is now the most consistent performer over 10 years as either first or second place over 1, 3, 5 and 10.

Worst performers over 12 months were BIAM and New Ireland with a negative return of -7.6% and -8.2% respectively.

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