Europe's pension funds are for the most part holding steady in their long term investment strategies, des-pite the choppy waters of the present global economic crisis which has led to considerable value reduction in scheme assets.

Klaus Kirschenhofer, head of portfolio management at German chemical group Wackerchemie says market un-certainties resulting from the combined Asia/Russia crisis have wiped 13% off the value of their equity exposure, currently standing at 32% of the overall portfolio.

However, he stresses that the fund will not react by altering its long term investment strategy at the moment, considering the fund damage to be relatively minor.

We have been in discussion with one of Germany's leading macro-economists and consequently believe that the global scenario has not changed sufficiently to warrant any change," he adds.

He says that the fund's heavily underweight position in Japan goes someway to explaining their present tempered concern for investment performance. He adds that the fund's 3% emerging markets and 5% Pacific basin exposure would continue, backed up by strong European bond and equity briefs.

"The crisis has certainly focused critical attention on passive management in Germany though, as the markets continue dipping. Fortunately, we ex-pect to reap profits from our active managers in a bear environment in em-erging markets and the Pacific basin.

"And this has been the case, with our managers outperforming the relevant indices by 6% and 9% respectively," he says.

The Brussels-based pension fund of Belgian group Tractabel reports similar slight losses on the fund's value. But Hervé Noel, pension fund manager, says the fund's long term asset allocation strategy will not alter, barring few very small tactical investment bets.

"At the beginning of the year we were not confident in US equities and so underweighted heavily, with the result that we did not compensate sufficiently for the market setback in Japan. Now we have significantly reduced Japanese holdings from their previous 5% portfolio level, and although normally re-investment in the market would be expected, we have not done so," he explains.

Instead, the fund has continued to underweight the Asian region in relation to the continuing decrease in market values. And although this has transformed the fund's benchmark strategy, Noel argues this as a reflection of the changed global economic reality.

"Our philosophy is now much clearer in terms of ensuring we are passive in Europe and the US, and active but cautious in Asia and emerging markets in order to avoid the big sectors and banks. Of course, it's nice to see what can be gained from a volatile market, but also easy to see how much can be lost at the same time," he says.

PKE, the Sfr5.3bn ($3.5bn) Zurich-based pension fund for Swiss utilities, has been unaffected by the global slump, according to Franz Winkler, head of portfolio management.

With overall exposure to Asia and the Pacific basin of only 3%, Winkler says the fund's only thought on the region is when they should move in to take advantage of the opportunities of the market as it bottoms out.

Subsequently, the fund has not im-plemented any strategy move, remaining firm in its sector approach in the strong markets of technology, pharmaceuticals and consumer goods.

"All our banking investment was sold previously, and thankfully we are completely active in our investment management, which has shielded us from the global turbulence. I say that, be-cause I know a lot of passive managers who have been severely burnt by the current downtrend," Winkler adds.

With markets down overall by be-tween 10-12%, Chris Wood, pensions director of the UK's Rover car group, says he expects to see the fund value drop similarly, although he has yet to see the quarterly review from the scheme's investment managers.

Wood says:"It is still too early though to say whether we will take any remedial action, but I don't believe we will make any direct investment strategy alterations. For us, the real crisis could be in the long term ramifications for the world economy of the situations in Japan and Russia, not the crises themselves, because our investments there are negligible."

With the fund invested around 60% in UK equities, Wood explains they are principally looking to their peers and outperformance of the CAPS median.If the industry as a whole has to shift its emphasis because of global factors, he says, then we will almost definitely have to compensate. "We do not tend to get involved in commercial pulls though, because the guiding tenet of our investment is purely and simply to meet our liabilities with our assets." Hugh Wheelan"

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