The good news is that the euro is already priced into the markets. But prospects for economic growth have clearly deteriorated. That will negatively affect Euroland budget constraints which can lead to a loosening of the 'stability pact'. The role of the European Central Bank (ECB) and its independency will be crucial otherwise we will have a weak instead of a strong euro. But, the risks of a weaker euro is increasing.

But also our job will change - apart from the euro-conversion by the end of the year by guiding our managers and custodians on a common and harmonious action plan, we will update our strategy.

The most strategic decision for a pension fund is its strategic asset allocation as defined on the basis of the pension liability profile and structure. As a pension fund with unconditional inflation-linked liabilities, changes in real interest rates are by far the most important risk. The likelihood to continue the same level of real rates as the last two decades is not high; we will probably go back to historic normal real rates. If you filter out anticipated inflation of the current yields you will have a 2% real interest rate which is more a less in line with historic long term average. Also the risk premium will be affected. These are very important inputs in ALM modelling that will not miss their impact on the strategic asset allocation.

Moreover pension funds will look for alternative sources of return on assets (other asset categories, credit risk). Also in the selection procedure of investment managers we will have to look for other skills (credit risk will become important - extension of investible universe, FX, BBB-rating etc, because duration management with convergence of (lower) interest rates and flatter yield curves will not add much value. We will benefit from EMU because we will have a more liquid and deeper/ broader local market.

Euroland means also a decreasing diversification amongst countries; we will have to look for international di-version outside Euroland. We will go for 'global equities' as the economy becomes more and more global. But 'bottom up' research capacities of in-vestment managers are not that glo-bal - you have very few players with global resources, and a lot of mega-mergers are not yet fully integrated to provide these.

Philip Neyt is managing director of the Belgacom pension fund in Brussels