IRELAND - The €21.3bn National Pension Reserve Fund (NPRF) has appointed a panel of three transition managers including Citigroup, Lehman Brothers and State Street in a bid to improve cost efficiency.
The three managers have been appointed for a four-year term to help the National Treasury Management Agency (NTMA) manage the transition of assets, securities and cash, including related derivative and foreign exchange transactions, managed on behalf of the reserve fund.
Adrian O'Donovan, spokesperson for the NTMA, said: "In 2001 when we had €6bn in cash we used a transition manager to transition into the markets but since then we haven't used one.
"As the fund has been getting bigger and we have appointed more and more managers, we decided to appoint transition managers for re-balancing between asset classes and investment managers."
It has become increasingly common for pension funds to appoint a stable of transition managers.
The UK's Pension Protection Fund, the government's lifeboat for pension schemes which are unable to meet their liabilities, is currently seeking a panel of transition managers, while Pensionskassernes Administration (PKA), the Danish occupational pension funds administrator, seeks cost estimations from two approved transition managers whenever it carries out a transition.
Whilst refusing to confirm that Citi has been appointed to the NTMA panel, Tim Wilkinson, global head of Citi Transition Management, said: "Panel appointments are definitely on the increase, especially by those funds which see an ongoing need for transition management services."
O'Donovan said the NTMA had decided to appoint a panel, rather than one individual transition manager, to take advantage of the different managers strengths.
"We expect the managers will be more competitive in different areas depending on where their expertise lies," he said.
Meanwhile, the NPRF announced today a return of -0.9% for the third quarter, primarily due to volatility within the equity markets on the back of the US subprime crisis.
Despite the negative return, the fund is still up 5.9% year to date.
Michael Somers, chief executive of the NTMA, said: "Equity markets have recovered the ground they lost in July and August at the height of the credit crunch due to the monetary authorities adding sufficient liquidity to enable orderly financing to take place, and also the cut in US interest rates in September."
However he cautioned that increased volatility in global investment markets and tighter credit could result in lower economic growth in the developed economies, with a consequent impact on corporate earnings.
During the quarter, the fund continued its diversification into property and private equity, committing €156m to three private equity investment vehicles and €35m to one property fund.
Some €15m was allocated to Delta Equity Fund III, the fund's first commitment to an Irish venture capital fund. The fund's total private equity commitment now stands at €929m and property at €1.1bn.
The NPRF was established to meet the liabilities of social welfare and public service pensions from 2025.