Few pension schemes can have their location in as historic a setting as An Post in Dublin. It is based at the General Post Office building in O’Connell St, where the 1916 Rising started with the reading of the proclamation founding a separate Irish Republic. The building is still the GPO and the headquarters of An Post, the national postal service.
An Post Superannuation Schemes, to give them their official designation, are much less old, formed in the 1980s when the postal service ceased being part of the civil service apparatus and became an operation on its own, required to fund its pension arrangements. Over a period of years, the Irish government paid across sufficient funds to meet the back service liabilities of these former civil servants, a process that completed in 1999 with a final payment of over E571m into the scheme.
The scheme has around 8,700 active members and 3,800 pensioners, as well as nearly 700 deferred pensioners, explains Paul Dolan, who is secretary to the trustees of the pension scheme, which is on a defined benefit basis.
The fund, which had assets of E1.34bn at the end of 2002, underwent its most recent restructuring in 2000, when a new global custodian – ABN AMRO Mellon – was appointed and the current manager roster established after a long term investment strategy review by trustees. The largest mandate, accounting for over 35% of the fund is run by KBC AM on a balanced active basis, Irish Life Investment Management runs a balanced passive mandate amounting to 29% of assets, with Bank of Ireland AM running a global equity mandate accounting for around 15% of assets, and Fischer Francis Trees & Watts looks after a Euroland fixed income brief at 19% of the portfolio, with European property accounting for the remaining 2%. Bank of Ireland and KBCAM between them manage E80m of property investments in Ireland.
The fund has along with most other Irish funds has a strong equity component of around 70%, the balance being made up of fixed income at 23% and 7% property. “In addition we also have a small exposure to Irish forestry, through the Irish Forestry Unit Trust,” he says. “This investment was made earlier this year.”
The aim is to increase the property exposure of the portfolio. The fund has always had a substantial investment in the Irish market with E80m invested indirectly via two of its investment managers, but it wanted to increase and widen the real estate element by investing across Europe, Dolan says. “That’s the beauty of the euro currency, it makes this type of transaction more manageable.”
Last year, the fund made the move into pan-European property, using specialist managers Pricoa with around E20m allocated to its pan-European Limited Property Trust, and over E2m invested in the La Salle Euro Growth 11SCA, with a total of E10m earmarked for this fund.
Along with most other Irish funds with a heavy equity exposure, the fund has been hit hard, suffering two years of negative returns, 4.79% for 2001 and 17.3% last year, after a positive 2000. This year’s welcome market rises will have helped the fund.
The trustee board is made up of three from the employer side and three staff representatives, with an independent chairman Patrick Gallagher, who formerly ran the Guinness pension fund in Dublin. “The trustees meet perhaps eight or nine times a year, which include review meetings with the investment managers,” says Dolan.
Currently, with the focus on equity underperformance, this scrutiny has been all the more active, he reckons. “One of the areas that has been discussed is to look at the specialist manager approach, but no decision has yet been made.” This move is being considered with advice from Mercers, the schemes’ actuaries and investment consultants. “We undertook a review last year, looking at all the circumstances of the fund in current markets, to ensure we are maximising the value of fund for members.” This resulted in increasing the level of information given to them in this year’s report and account. “In particular, we want to allay any fears they may have, with all the pension stories in the media,” he says. He does not have doubts about them understanding why the heavy drop in the fund has happened, but they need to know that the trustees are constantly looking at the ways to improve the performance. “Our aim is to look at everything.”
Dolan adds that all the national discussion about such legislative areas as the winding up of funds does worry pensioners, even though they are in a very strong position as the prime creditors of the fund.
And there are the normal commercial pressures on the An Post as the sponsoring employer, who are anxious not to have their bottom line affected by additional pensions contributions.
Having up to date and reliable information is a key element in being on top of things, he reckons. The new custody structure has brought benefits in this area. He has access on a daily basis to the custodian group’s online database. “This effectively means we can run live accounting position and custody reports and financial statements.” As an accountant by training with a systems background, Dolan finds this extremely useful.
The monthly and quarterly reports from the custodians are a very important tool for running the fund. “We look at everything from movement on net assets, down to income received, for each manager and then on a consolidated basis.” In the quarterly report, they go down into details such as failed trades, which could highlight the need to see if something is going wrong and why. “This gives us a very good insight into where things can be improved, if there is slow settlement, for example. It’s a real audit of the performance from this perspective and the trustees have the visibility of such reports.”
The monthly reports come in soft copy format and these are analysed by Dolan, who will provide updates if needed to the trustees. But he also takes a proactive approach. “I like going into our part of the database and opening up a file and see what is going on.”
There is a huge volume of information there and on the investment manager websites. “I now have access to our data on three of our managers.” This means he can respond immediately, especially when he gets the calls at month end as to what the exact position of the fund, before the actual reports come in within the stipulated time. “The numbers are there, even if they are not in a final “closed off” state. So you can obtain good ballpark figures.” This can be very useful for trustees, particularly having in a uniform format an investment report, with strategy comparisons, performance against benchmarks, asset allocation and sector/geographical breakdown.
“In addition to the narrative outlining events that have occurred, the outlook section from managers is always interesting, especially when this is updated as conditions change. I believe that in addition to having the numbers you do need the narrative and interpretation of the managers.”
There are deeper levels of information available from the custodian, but he reckons that care must be taken to balance the value of this against the costs that would be involved.
Dolan is a strong believer that having trustees who are kept abreast of what is happening puts them and the fund in a stronger position. “Being a trustee is much more demanding nowadays.” A key role for him is to make sure they have the data they need when they need it.

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