The Irish Association of Pension Funds organised a conference in late October – with hedge funds and the outlook for corporate trustees among the topics aired.
Joseph O’Dea, senior investment consultant at Watson Wyatt in Dublin, told delegates hedge funds produce lower returns than equities but can cut risks. “We’d expect to get lower returns from hedge funds than equity but also lower value at risk,” he said. “Essentially what I am saying is that more efficient structures reduce your reliance on the active risk premium.”
Advising a diversified approach, he said hedge funds, private equity and high yield give “more bang for your bucks” and “a better pay-off” than traditional strategies.
“The days are gone when you can just put in a strategy and then do what everybody else is doing,” he said. “A dead fish always swims with the tide,” he added.
“I think your bet needs to be diversified. Why don’t we have more in private equity?” he asked. “Pension funds seem to be obsessed with liquidity. Why is it necessary to be able to buy shares you can sell tomorrow?” He added that Watson Wyatt was doing a lot of work on “ long-term equity mandates of up to 10 years.”
A consultant at rival firm Mercer raised the idea that multinational companies could be trying to exert control over subsidiaries’ trustee boards. The trustee role is “an extremely difficult place to be,” said Tom Murphy, senior investment consultant at Mercer Investment Consulting in Ireland.
He saw “tension” between the various parties such as the sponsor, trustees, advisers and asset managers.
“You are starting to see multinationals at the centre trying to exert control over various trustee boards,” he told a Dublin conference. “But ultimately, it all has to work for each trustee board.” Murphy did not name any of the companies involved, but his comments come amid a greater focus on pan-European investments and new pooling vehicles.
At the same event, Gerry Ryan, chairman of the Irish Association of Pension Funds, called for trustees to have “a higher profile”.
“Often trustees are quite invisible and that’s a worry that has to be addressed,” he said. But he was not in favour of remunerating trustees in case it led to competition for places. Ryan also told delegates that investment consultants could have a role in setting the balance between trustees and employers: “Maybe that’s a fruitful field,” he said.