Irish pension funds shift focus to offset deficit disaster
IRELAND - Irish pension funds will increase their allocations to alternatives, adopt global benchmarks and invest in growth portfolios in an attempt to immunise their liabilities.
Gregory Ehret, EMEA head at State Street Global Advisers, said the "state of Ireland Inc" in recent years had provided a catalyst for Irish pension funds to rethink their portfolios.
In an interview with IPE following State Street's €57bn takeover of Bank of Ireland's funds business, he said he expected Irish schemes, which have up to now tended to make negligible allocations to alternatives, to increase them.
At the same time, schemes nationwide will also move toward adopting global benchmarks for their equity portfolios.
"This is a trend across Europe, so it's no surprise that it would happen to Irish pension funds," said Ehret.
However, unlike pension schemes in other European countries, Irish pension funds have tended to invest domestically - or at best in mature western markets.
A third trend will comprise efforts on the part of Irish pension funds to immunise their liabilities by investing in growth portfolios with an emphasis on emerging markets.
Yet despite the economic crisis, Ehret said these trends would take some time to materialise.
"The obstacle is education," he said. "It's up to us to make sure people know what's out there."
The Bank of Ireland sold its asset management company as a condition of the European Commission's approval of a €3.5bn government bailout.