1999 is set to be a very interesting year for global investment markets. After the turbulence of the past year, most investors will approach 1999 with considerable caution. It is likely that the world-wide economic backdrop in 1999 will remain unsettled with many Asian countries re-maining in recession. The inflation picture will remain muted in 1999 which should be positive for world-wide bond markets. Within Europe, the advent of the euro heralds the be-ginning of a new era for European capital markets. The new ECB comes into operation and will strive to establish its credibility during 1999.

The earnings growth picture for the major world equity markets going forward is moderate and markets in 1999 will be vulnerable to any earnings disappointments. The US market will continue to be the main driver of sentiment and how this market performs in 1999 will be of particular in-terest given its current elevated valuation levels. Most European equity markets should experience reasonable earnings growth next year while the situation in Japan and the Far East remains bleak.

For Irish pension funds, the advent of the euro will lead to a gradual de-crease in their exposure to the domestic equity market. Currently, Irish pension funds have 25-30% invested in the domestic equity market. The Irish equity market will represent under 2% of the combined euro equity market and inevitably there will be a move from Irish equities into European equities. The Irish equity market currently represents reasonable value compared to its European counterparts and it is expected that any moves by pension funds to reduce Irish equity weightings will be gradual and controlled.

For the Telecom Eireann Superannuation Fund, 1998 saw a fundamental review of investment strategy and the appointment of three new investment managers bringing our total to five. Our commitment to property was considerably increased over the last year and this will continue during 1999. We believe that the fund is well positioned to meet the many challenges that will arise over the year ahead in investment markets.

Ciaran Naughton is with Telecom Eireann fund in Dublin