Pension funds recovered during the second quarter of 2003, rising by an average of 9 per cent, according to the latest figures from two pensions consultancy firms, Mercer and Becketts.
The positive returns represent a turnaround from the first quarter of 2003, when losses of 5 per cent compounded a miserable 2002 for pension funds.
Last year, almost 19 per cent was wiped from the value of the average Irish pension fund.
The recovery was buoyed by "the reasonably swift conclusion to the war in Iraq, further ECB and Federal interest rate cuts, as well as some signs of improving economic fundamentals", said Ms Gráinne Alexander, senior investment consultant with Mercer.
However, Becketts added that the much-needed reversal of negative equity returns, which took the shape of a post-Iraq war rally, did not occur on a scale that many fund managers were hoping for.
Stock selection is now crucial, said Mr Kieran Barry, managing director of Becketts.
"Indications are that some stocks across all markets are currently good value and, therefore, stock selection by investment managers will be critical in determining the managers' performance in the coming 12 months," said Mr Barry.
Some analysts believe bonds, up by 7 per cent on the year to date, have peaked. But it may take time for investors to move away from the safety of bonds after the turbulence of the past three years, according to Becketts.
Irish Life was the best performing fund manager over the second quarter of 2003, according to both surveys, achieving growth of 11.4 per cent.
AIB and Eagle Star were the worst performers, both returning 8.1 per cent.
Despite the recent strong gains, people who began investing in a pension five years ago have not seen any growth on their money and may even have lost some of it.
The average pension fund lost half a percentage point per annum over the past five years.
New Ireland was the top performer over five years, with returns of 2.7 per cent per annum, followed by Montgomery Oppenheim, with returns of 2.6 per cent.
AIB was the worst performer over five years, running losses of 2.6 per cent per annum.
Ms Alexander said the longer-term nature of pension fund investment showed a more positive picture.
"Over the 10-year period, the declines over the past three years are overshadowed by the strong double-digit growth of the mid to late 1990s," she said. As a result, the average return over 10 years is 8.8 per cent.
