August proved a wicked month for financial markets and for the participants in the Rehab Great Investment Race, three of whom are now languishing in the red. Setanta's fund has joined Irish Life and Pioneer at the bottom of the pile, with a fund value below the starting level of €100,000 (£78,700).

The fund management arm of Canada Life lost 7.6 per cent during the month as stock markets worldwide fell, hit by mixed economic signals and downbeat corporate statements, while matters weren't helped by the thin trading conditions typical of the holiday season.

In concrete terms, the ISEQ lost 5 per cent of its value, taking its cue from the Dow Jones index, which was down by a similar amount, while the tech-heavy Nasdaq fell nearly 13 per cent.

Setanta's fund is worth €94,669, a loss of 5.3 per cent since April.

This leaves it in fourth place overall - ahead of Pioneer and Irish Life which are sitting on overall losses of 9.8 per cent and 14.8 per cent respectively after losing heavily in August.

In the contest, six teams of fund managers are pitted against the market, and each other, for one year. The aim is to make as much money as possible, with all profits going to the Rehab Group.

Despite three of the teams having lost money, Rehab is still ahead, thanks mainly to consistently strong performances from Hibernian and Bank of Ireland.

Taken as a whole, the €600,000 given to the six fund managers is now worth €666,005, with the leading two funds having contributed the lion's share of this.

According to Mercer, the official monitor of the race, Hibernian's fund is now valued at €156,475, a 56.5 per cent rise since the race started. Behind it lies Bank of Ireland with a fund worth €136,918, a gain of 36.9 per cent.

However, both funds were only marginally ahead over the course of the month, illustrating just how tough market conditions are.

Hibernian managed the biggest monthly gain of 1.7 per cent, thanks to a strategy of doing "very little". The fund manager plumped for the safe haven of cash for most of August and plans to stick to the sidelines while keeping a wary eye out for investment opportunities.

"We are very cautious but we are also conscious that markets continue to lose ground and are looking for opportunities to put money in," says Hibernian's Mr Dara Fitzgerald.

Meanwhile, Bank of Ireland stuck with its policy of investing in a handful of selected stocks to manage a meagre gain of 0.1 per cent.

Third in overall terms in the race is Friends First, despite losing 3.9 per cent over the course of the past month. Its investment, which is split between three funds and three stocks, is up 2.5 per cent since April.

Pioneer fund manager Ms Anne Barker attributes the 9.7 per cent drop in her fund value in August to a premature move into technology stocks. "I was too optimistic, too early," she says. This prompted her to retreat to old reliables, such as cash and bonds, where she had 70 per cent of her portfolio heading into September.

For those in negative territory, the pressure will be on over the remaining seven months of the competition to make good their losses.

The recent events in the US have made their task even more difficult.

The terrorist attacks on the World Trade Centre and the Pentagon, which caused the four-day closure of Wall Street and sharp declines in equity markets worldwide, will have taken their toll on the Rehab portfolios.

Those fund managers who had switched some of their investment into more secure assets like cash to avoid the volatility seen over the summer months should be insulated from the worst of the recent falls.

But funds with total or heavy exposure to equities will bear the full brunt of the recent collapse in equity markets.

jmosullivan@irish-times.ie