IRELAND – Hewitt Associates’ Irish arm Hewitt & Becketts says it has developed a new index to evaluate the performance of managed pension funds in Ireland.
The firm joins Mercer Investment Consulting and Heissmann Consultants in monitoring the Irish market.
Hewitt said its index is a notional basket of publicly quoted indices combined in the same proportions as the average asset allocations used by the managers of Irish pension funds.
“Traditionally, Irish managed funds have been evaluated relative to the peer group - the average return of funds in the managed fund surveys,” said Deborah Reidy, director of investment consulting who joined the firm in March from Ireland’s National Treasury Management Agency.
“We believe this measure alone is unsatisfactory. An average of a small number of managers is easily skewed or pulled (in either direction) by the extreme performance of any one fund.”
She added the index allows analysis of manager style against “a known and relatively stable target – an index”. “The peer group, or average, represents a constantly moving target against which it is impossible to analyse a manager’s performance, style or skill.”
“In addition, when we focus on an average, approximately half of the funds in the survey will, by design, outperform and approximately half will underperform – even if the entire group of funds did better (or worse) than the markets or indices in which they are investing.” She objective quoted benchmarks provides “much fairer and more stable and consistent analysis” than by peer group.
According to the Hewitt & Becketts Index, the average manager underperformed by 1.8% over the 12 months to June 2004.