The value of Irish pension fund assets plummeted by €3 billion last month as recent volatility in global equity markets - and the Irish market in particular - took its toll.

The latest estimates from Mercer Investment Consulting show that the average Irish managed pension fund fell by almost 3 per cent in July. This compounds the losses incurred in June, when funds shed an average of 1 per cent in value.

Many global stock markets were in negative territory last month, but the Iseq index of Irish shares produced one of the weakest performances, dropping by 8 per cent.

Domestic managed pension funds are heavily weighted towards Irish equities, so this underperformance had a significant impact on the funds' growth.

Tom Geraghty, head of Mercer Investment Consulting in Ireland, warned yesterday that managed funds were not sufficiently diversified.

"The Irish market accounts for less than 1 per cent of the FTSE world index and yet comprises 18 per cent of the average managed fund in Ireland," he said. These funds are therefore significantly overexposed to one single market, with high stock and sector concentration risks, he added.

"In my opinion, managed funds are not appropriately diversified and are running significant equity and local market exposure," he said.

On a positive note, Mr Murphy estimated that funding levels of defined benefit pension schemes improved by as much 20 per cent in the first half of the year, buoyed by rising long-term bond yields.