Irish funds focus on managers' process
Irish plan sponsors are becoming more aware of the investment strategies of their funds. Around 90% of Irish pension fund’s sponsors claim to understand their investment managers processes and investment styles and the likely effects they will have on future relative performance, according to the 2000 survey on pension funds investment published by the Irish Association of Pension Funds (IAPF).
“I wouldn’t say that sponsors are becoming more involved on the funds investment side,” says Des Crowther, IAPF’s director in Dublin. “What is happening is that trustees are becoming more aware of their responsibilities and probably understand better the more complex investments issues,” he says. “They are more financially aware and have a better knowledge about what the managers are doing.” However, the IAPF shows its concern about the low rate of schemes that have signed an investment agreement with their managers. According to the results of the survey, only 55% of DB and 51% of DC plans have done so.
The survey, based on the responses of 167 pension funds, representing assets in excess of IEP£17bn (e22bn), also shows that even though only 14% of the respondents running a defined benefit (DB) scheme said to have undertaken asset liability model (ALM) studies, more and more pension funds are using these systems to help setting investment strategies.
Thirty six percent of DB plans sponsors stated to have changed their investment managers during the last three years. The figure for those running a DC scheme is 26%. The study points that, increasingly, when pension funds change managers, they commission independent reviews of the process undertaken to, in the majority of the cases, t a consultant.
However, when it comes to investment strategies the role of the consultants is much less significant. When asked about who was the primary instigator of the changes in the funds asset mix as a result of the introduction of the euro, only 10% of DB and 7% of DC schemes stated to have used consultants. In almost 80% of the cases the decision came from the investment managers.
In terms of asset allocation, the move away Irish equities is affecting both DB and DC schemes in the same. Plan sponsors expect to see their exposure to Irish equities reduced from 23% to around 13% in the next four years. Around 70% of those assets will be re-allocated into euro stocks and about 30% in global equities. This explains the increasing interest from Irish pension plans in foreign asset management houses. Although the trend towards defined contribution (DC) schemes continues, only 26% of the schemes responding the survey are currently following this model