ICELAND - Judging by performance of domestic and foreign equities the Icelandic pension fund association (IPFA) is expecting pension funds to return around 10%. (amends 2005 return).

"We predict that the average real return 2006 will be around 10%," Hrafn Magnússon, managing director at the Landssamtök líifeyrissjóða, the pension fund association, told IPE.

Average real returns in 2005 and 2004 were similar at 13.2% and 10.4% respectively.

As only a few of the almost 50 pension funds in Iceland have published their returns so far,  Iceland's central bank, Seðlabanki Íslands, can only provide estimates for returns too.

"Those who have are reporting good returns for the year. So I am rather expecting a good performance by the funds overall," Kristíana Baldursdóttir, division chief for Statistics & IT at the bank summed up the outlook for IPE.

As  to the reasons for the positive returns, Magnússon points the strong performance of equities, with the Icex Main index for domestic equities returning 15.2% and foreign equities  20.1%. In addition, the Icelandic Krona performed well against foreign currency, Magnússon noted.

Combined, almost 30% of all pension fund assets for both fixed-income and equities are invested abroad.

The central bank has reported a 22.7% growth of assets in Icelandic pension funds at year-end 2006 bringing the total to ISK1.5trn (€17bn).