In conjunction with the investment consultancy practice of Mercer, IPE surveyed over 300 pension funds across Europe to assess the changes that they were putting in hand, or already had undertaken because of the euro.
The overall conclusion from the responses is that those funds within the Euro-zone ('ins') had made progress in adapting to the new scenario, but that those in the 'outs' were not that far behind:
Timing and the Euro
As a result of the euro have you made/will you make any changes to the following and when did you make/or do you expect to make these changes?
Asset Allocation: Fifty per cent of res-pondents have already made asset allocation changes. The 'outs' appear almost as zealous in making asset allocation changes as the 'ins'.
Of those who have made changes, two-thirds are deemed to be 'major' changes and the rest appear to be 'minor'. The 'outs' are making minor changes and the 'ins', major ones. Of those who have made no changes, the 'ins' are looking to make changes over the first half of 1999 and the 'outs' likely to do so toward the latter half of 1999 and beyond (some, predominantly the UK funds, looking to make changes after 2000).
Choice of benchmarks: About one-third of the respondents have made changes to their benchmarks. The 'outs' being more active than the 'ins'.
Of those who have made none, the majority intend to make some sort of change over 1999.
The survey appears to suggest that the majority of the respondents have either changed their choice of benchmark or intend to do so - this is perhaps a little surprising.
Fund managers: About one-third of the respondents have made changes to their fund managers. Consistent with the asset allocation changes the 'outs' have been more active than the 'ins'. About half of those who haven't made changes intend to do so. Most of these changes are planned for the first half of 1999.
Domestic market effect:
In what way do you expect to change/ or have you already changed your holdings of the following assets due to the euro?
Two-thirds of the respondents plan to decrease the holdings in their home country. Interestingly this applies equally between the 'in' and the 'out' countries. The rest plan to maintain the status quo; perhaps surprisingly a number of the 'ins' expect the domestic holdings to remain the same.
The majority (over 75%) of the respondents expect Euro-zone assets to increase.
Only about one-third of the respondents expected assets from outside the Euro-zone to increase. Of this, the majority were the 'outs'.
It would appear that for the 'ins', the current domestic bias is likely to be extended to Euro-zone.
Readiness for the euro:
How prepared do you feel you are to deal with the issues arising from the arrival of the euro?
Over half (50%) of the respondents claim to be fully prepared to deal with the issues. The rest are getting there, with only a (small) minority confessing to being completely unprepared.
Benefits from the euro:
Do you think that in the long run the introduction of the euro will be beneficial to your fund?
Pension funds appear to be equivocal about the benefits of the Euro. About two-thirds are of the view that the Euro will in the long run be beneficial, the rest are uncertain.
This uncertainty manifests itself between the 'ins' and the 'outs'.