The increasing complexity and sophistication of the Irish pension fund market is helping consultants expanding their business. Even though the market is still dominated by the international consultancy houses, more and more the local firms are gaining business.
Pension fund trustees in Ireland have long been using the services of consultants when it comes to advice on fund structure and administration, but during the last few years investment consulting has became more important, thus changing the relationships among managers and investors.
“Consultants are now an important part of the pension business in Ireland,” says Tony Gargan, chief manager at the portfolio management division of AIB Investment Managers in Dublin. “More and more they are getting involved in trustee training and information courses and probably, in the medium term, we will see more clients demanding specific services from us, following the advice of consultants,” he says.
At Bank of Ireland Asset Management, head of institutional business Pat Lardner agrees: “Consultants are talking to clients about the structures that are best for them to achieve their objectives in the long. They discuss with them the asset allocation they should implement and the number of managers they should be taking on. Our job is to work with them and demonstrate that we can execute what they need.”
William M Mercer is still the largest player in the market, a position that the company has built up after many years of presence in the market. With a very high marketshare, that some estimate around two thirds of the market, it is sometimes difficult for competitors to gain new clients.
“We do see that at present we have an influential position in the market but we have very active competitors, both international and domestic firms,” says Paul O’Faherty, chief executive at Mercer in Dublin. “In the last few years the investment consultancy arena has changed a lot. The market has become more sophisticated and the profile of pensions funds has changed. “
O’Faherty highlights issues such as the use of specific individual benchmarks and the move from balanced mandates to specialist mandates as some of the reasons why the need for independent advise is now more important than ever before.
Joe Byrne, deputy managing director at Coyle Hamilton in Dublin says: “Pension funds legislation is changing and becoming more technical. The introduction of different investment vehicles like hedge funds or venture capital investments and the use of different benchmarks, means that consultants have now a greater role to play.
“Trustees are now more aware of their responsibilities and they want to know more about the needs of their funds and risk analysis. They are asking for asset liabiltiy modelling studies and they want to educate members about investment options.”
Consultants are also closely involved in manager searches and in same cases have facilitate foreign managers to win mandates from Irish institutions. “Investors in Ireland are opening up to foreign providers, and although in many occasions they do prefer to hire an Irish manager, they are now more aware that they have to work with those who best meet their requirements, regardless where they are based,” says Philip Shier, partner at Delany, Bacon & Woodrow in Dublin.
He adds: “When it comes to manager selection expertise is one of the major factors they take into account. They want to know what is behind the organisation and how clear their investment process is. And this is where we are helping them.”
For the months to come it is expected to see more investors reviewing their managers. This would definitely mean more work for consultants, that are now focusing on developing further their investment divisions. “One of our priorities, also part of our merger with Hewitt, is to develop our investment consultancy services. There is a lot of potential in this area and we expect to work in important projects during the next months.”