Irish pension funds have been warned that EMU conversion could prove to be an operational nightmare" at the launch of a new guide for trustees published by the Irish Association of Pension Funds (IAPF).

The 20-page guide includes a checklist for trustees, an examination of the implications for benefits and liabilities, legal requirements, investment, performance measurement and ad-ministration and communication.

Speaking at the launch held in Dublin last month, Sean Hawkshaw of the IAPF described the three year transition period from 1 January 1999 to 31 December 2001, when the no compulsion, no prohibition principle prevails, as "an operational nightmare that has greatly increased the cost and effort required to make the transition".

Hawkshaw, adding that he was also drawing on the EMU change programme of Ulster Bank where he is an investment manager, said: "The important thing to recognise is that the euro will be the single legal currency of the participating member states from 1/1/99." He added: "It is not that easy to define precisely what euro compliance means."

The IAPF urges pension funds consider certain questions including how different inflation and interest rates will change the liability profile, how currency risk should be managed, can risk/return be improved by reducing Irish asset weightings and whether funds should look for extra yield from corporate bonds.

On performance measurement, Hawkshaw said: "It is essential that the integrity of historic performance numbers and rankings is preserved." He added that pre-euro performance can be chain linked with post euro numbers, but warned that care must be taken over ex-euro European countries. "It is important to be aware of the potential problems comparing returns stated in euros derived through a different currency base."

On reporting, he said that investment managers would probably report in one currency either euros or punts with summary values in the other, while saying that trustees should ensure consistency between managers. He warned trustees to check the liability clause of their custody agreements. "The most tricky parts of the conversion work are done by the custodian and if there are not adequate procedures, controls and systems to cope with the euro processing environment your fund could be exposed." John Lappin"

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