A bullish third quarter has helped Irish pension funds more than overcome the losses of the previous three months. The average Irish group managed fund grew by 5.4 per cent in the three months.

After a poor second quarter, when funds lost an average of 4.2 per cent of their value, the third-quarter rally brings the average gain for the year to date to 6.5 per cent.

In September alone, Irish pension funds gained 1.8 per cent as oil prices fell and market sentiment in Europe rose on the back of strong corporate results and mergers and acquisition activity.

"Funds also benefited from good returns in their property and bond assets," said Noel Collins, senior consultant at Mercer.

He said that the third quarter was essentially a "sweet spot" in terms of pension fund investment, with all of the main asset classes delivering strong performances.

"Unfortunately, such favourable conditions usually don't last very long," he added.

The rise in bond prices also means yields fell, increasing pressure on pension liabilities.

Friends First/F&C delivered the strongest performance of all the funds last month, with a gain of 2.1 per cent. At the other end of the scale came Oppenheim, at 1.2 per cent.

It also lagged its peers over the quarter with a return of 4.6 per cent, compared to Standard Life Investment's industry-leading 6.5 per cent.

So far this year, Hibernian has produced the best returns with growth of 7.7 per cent. Bank of Ireland Asset Management's (BIAM) 4.3 per cent return lags its peers.

Average gains over the past 12 months come to 11.7 per cent after a strong end to 2005. The 13.6 per cent return at Standard Life beats its rivals, with Canada Life/Setanta propping up the table at 8.7 per cent.

While average annual returns over the past three years have been 14.8 per cent, the comparative five-year figure is just half of that - 7.3 per cent a year - as the impact of the bursting of the dotcom bubble continues to be felt.

Over the more relevant 10-year period, Oppenheim continues to lead the way with average annual returns of 12.1 per cent against an industry average of 9.4 per cent and Canada Life/Setanta's underperforming 8.2 per cent.