IRELAND - Consultants have urged pension fund trustees to diversify away from Irish property in the medium term, despite property funds averaging 6.9% returns in 2007.
In the Q4 edition of its InVision survey of group pooled pension funds, the consultant revealed on average managed funds returned -4.3%, although Oppenheim Investment Managers was the best performing fund, with -2.6%, compared to the Hewitt Managed Fund index of -3.9%.
The worst performer was New Ireland, with -5.7% over Q4, and it also fell the most over the 12 months to the end of December 2007 at -8.2%, while AIB Investment Managers (AIBIM) produced the best returns over the year of 1.3%, compared to the average return of -3.6%.
AIBIM also produced the best returns for Irish biased equities over the last three months of 2007, at -3.7%, as the Hewitt Equity Index reported returns of -5.3% and the FTSE All World Developed Index returned -4.7%.
Global equities performed slightly better, with Irish Life Fidelity Managed beating the FTSE All World Dev Index, with a return of -0.5% compared to -4.7, although over the year the fund was the best performer with returns of 9.5% compared to the index yield of -0.8%.
Findings from the quarterly survey also revealed AIBIM offered the best performing property fund over the quarter, with returns of 1%, in contrast to New Ireland which returned -3.2%, although the highest returns over the whole of 2007 came from ILIM Irish Property fund which achieved 10.7%.
Overall, the average return on property was 0% in Q4 and 6.9% in 2007, however Hewitt warned "any investment in property should be treated with caution" as the issues of liquidation and timescale are often overlooked by trustees.
It added pension trustees "need to be conscious that property is a long-term investment" and claimed it "is not realistic" for pension schemes to think about switching out of property funds in order to benefit from two to four year opportunities.
That said, Hewitt claimed there are times when the medium tern outlook means it is "sensible to diversify property exposure rather than limiting exposure to just Ireland", adding that it believed now "is one of those times".