Noel Collins, senior consultant at Mercer, says that the Irish stock market is overweight in financial and housing-related stocks, sectors which have been affected by falling demand for housing and by the global credit crunch.

Mercer estimates that the average Irish pension managed fund is down about 5% this year, having been up over 4% at mid-year. This would represent a swing of €9bn in the second half of the year.

Irish equities, to which many Irish schemes are heavily exposed, are down by over 20% year to date, and down 30% from their 2006 highs, largely due to weakness in the share prices of the retail banks.

Brian Griffin, Senior Investment Consultant with Mercer said: “Recent events highlight once again the importance of broad diversification – both geographically and across industry sectors - for Irish pension funds. Many pension funds have moved to address this issue in recent years but for many other schemes they continue to be negatively impacted by over concentration in the Irish market and the stock and sector risks inherent in this approach”.

The Irish equity market performed exceptionally well in comparison with global markets last year, the ISE reported in January, 2007, and the 28% increase in 2006 in the ISEQ Overall index outperformed indices such as the Eurostoxx 50, FTSE, NASDAQ and the Dow Jones Industrial Average. The index reached a lifetime high of 9,453 on 28th December.

The ISEQ sub-indices also reached their lifetime highs in December with the ISEQ Financial, General, Small Cap, ITEQ and ISEQ 20 indices gaining 25%, 30%, 34%, 44%, 28% respectively in the year.

The market capitalisation of companies on the ISE grew to EUR119.3 billion in 2006, an increase of 26% on the prior year's total of EUR94.7 billion. The ISE saw equity turnover grow to EUR129.2 billion in 2006, a 19% increase on the 2005 total of EUR108.8 billion, and average daily turnover for 2006 was EUR511 million. The fourth quarter saw a 29% increase in average daily turnover to EUR555 million when compared to the 2005 daily average of EUR430 million.