Paul Dolan, secretary of the An Post Supperannuation Scheme for the Irish postal service, which has €2bn in assets
year and a half has passed since An Post transformed its investment manager mix. But only when all the results are in for 2006 will the €2bn pension scheme of the Irish postal service really be able to judge the new mandate holders, says Paul Dolan, secretary of An Post Superannuation Scheme.
"It's the first year we'll be able to really assess all the new managers on a calendar-year basis," he says. The numbers will be positive, he predicts, but nothing like those attained the year before. However, the pension fund already has a good idea how the restructuring has gone, having interviewed all the managers on several occasions, he adds.
In the revamp completed in August 2005 and aimed at reducing risk and increasing return. Axa Rosenberg and AllianceBernstein each gained €264m Europe, Australia, and Far East mandates. Axa also won €80m in global small caps, while Citigroup (now Legg Mason) gained €80m in emerging markets.
PIMCO took on €240m in active bonds.
KBC AM lost €530m in active global equities and bonds and Irish Life AM lost €450m of passive international equities and bonds.
BIAM now manages a passive mandate, having previously managed an active global equity portfolio. The pension fund is in the process of raising its exposure of some other assets to the level it was before the overhaul. The property allocation will be brought back to 7%, following the mandatory buybacks from KBC. So far, €10m has been invested in Rockspring's UK Retail Fund property investments. Up to €12m may be channelled into Irish property funds.
"We're definitely looking at venture capital as part of that asset class," Dolan says, adding that the fund may consider using currency overlay too.
The appointment of Paula McGauran in the new post of pension investment manager should give a boost to the scheme's investment management. "We feel we need to strengthen the team and offer more analytical information to the fund trustees."
Whereas up to now, reports have been prepared quarterly for the trustees through the fund's consultants, the fund will now be able to do this in-house and more frequently.
Patrick Ferguson, secretary of the CWPS Pension Fund for Ireland's Construction Workers' Pension Scheme, which has €730m in assets
ith its new benefit structure, investment performance at Ireland's Construction Workers' Pension Scheme is now much more of a direct concern to individual members than before. With that in mind, maintaining performance on an ongoing basis is one of the main issues for trustees this year, says CWPS Pension Fund secretary Patrick Ferguson.
"With a defined contribution (DC) scheme, the return is much more transparent (to members)," he says.
"It didn't really concern members before what the return was, or whether there was volatility in the investment performance," he says. But now members are bound to compare returns with those of other investments, which puts pressure on the scheme to get the funds right, he says.
"This year we will be looking at much more diversification of assets," Ferguson says.
The CWPS - which won the 2006 IPE Award for Ireland - has replaced the old Construction Federation Operatives Pension Scheme, and in the process has changed from a hybrid defined benefit scheme to one that is hybrid DC. "That change has taken up a lot of last year, along with the issues surrounding it," says Ferguson.
Decisions have had to be made and changes implemented to restructure the investment strategy, as the scheme is now operating what is essentially a DC scheme, he says.
"In conjunction with our investment adviser Acuvest, we have been looking at our strategy," he says. "It will be a new strategy involving individual funds for members." Members will not have investment choice; this will be managed by the trustee board. There will be default ‘lifestyle' option, he says, which increases the ratio of fixed income to equity and property as retirement approaches.
Although the investment funds have changed, the manager mix has remained the same, except for a new manager taken on for high-yield equities, says Ferguson. There are now four managers for fixed income and equities and three for property, he says.
Although most of the assets were transferred from the old scheme to the new by 19 December, the old scheme has not yet been fully wound up. "So we have been running two funds," says Ferguson.
Colm Whooley, finance director of the Sisk pension scheme for contractor John Sisk & Son
he pension fund of John Sisk & Son, Ireland's largest general contracting company, is looking forward to a year of relative normality. A revamp that transformed the whole scheme has dominated the last two years, says finance director Colm Whooley.
"We've just gone through a huge restructuring of our pension schemes, so we are probably over our biggest challenge," he says. The shape of future investment strategy, what classes of asset to invest in and choice of investment managers are the main issues facing the fund.
From the actuarial point of view, he says, there is a drive to reduce equity weightings and increase fixed-income investments, in a bid to match assets more closely to liabilities. But Whooley says there are still good arguments for keeping high levels of equities in a pension fund mix.
"Long term, equities always outperform bonds and investing in pensions is a long-term business so as trustees and as corporate sponsors we should try and achieve the best return on our assets," he says. And the past year was not the time to raise fixed-income weightings, he adds, because of rising interest rates.
Since 1997, the Sisk pension scheme has operated largely on a defined contribution (DC) basis. However, there are real staff-retention benefits for businesses in providing employees with a defined benefit (DB) scheme, says Whooley, adding that a return to a DB/hybrid scheme is worth considering in a sector such as construction which has high levels of staff turnover.
Conventional thinking would imply that DC schemes are cheaper to operate but Whooley argues that for a young workforce with high turnover of staff, the DB option can in fact end up being cheaper.
Straight DB schemes can get very expensive as the workforce ages, he says, but working against that is the fact that the DB pension scheme operates as an effective barrier for experienced staff to leave the sponsor's employment. This is because the implications in terms of transfer values can be very high.
The inherent long-term costs of DB schemes can also be capped by the use of hybrid DB schemes, says Whooley.