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Winners and losers in 2007

While all group pension managed funds in Ireland were posting negative returns late last year, figures from Rubicon Investment Consulting show that some were doing less badly than others during the worst of the rout.

In the fourth quarter, the managers made losses ranging from 2.6% to 5.5%. And on average, the asset management groups clocked up losses of 2.6% for their group pension managed funds for the full year, with AIB Investment Managers and Eagle Star the only managers to end 2007 with positive returns. However, these were slim, at 1.3% and 0.6%, respectively.

Did certain approaches equip asset managers for a smoother ride?

Canada Life/Setanta avoided the steepest declines late in the year, ending with a 1.8% loss for 2007. Fiona Daly, managing director of Rubicon Investment Consulting, puts Setanta’s relative success down to its very low exposure to Irish equities, but adds there has been a downside too. “Over the long-term, it has actually hurt them because Irish equities have done so well - so it’s swings and roundabouts,” she says.

Setanta’s investment process is different from most managers in Dublin, says marketing director Alan Hickey. “We prefer to look globally,” he says. “Our process is predominantly sector-driven; we prefer higher quality companies which have generated strong cash flow throughout the business cycle, and their peers within that sector.” The idea is to invest in companies fitting that profile for the long haul, rather than frequent switching. “We felt that an extra significant weighting of the Irish market against the MSCI would be moving away from that.”

But Hickey points out that in September, Setanta rebalanced the pension managed fund assets to increase the weighting in Ireland following significant declines in the ISEQ as the Irish equity market moved towards more attractive valuation levels. “Over the long haul, the Irish economy looks in reasonably good form; GDP is ahead of European peers; subject to any major external shocks, it should do well.”

Daly says that, as a top-down manager, Eagle Star takes a radically different approach and has managed to outperform most of its peers. “It depends how the various different approaches demonstrate themselves over the next year or so.”

Eagle Star pension director Brendan Johnston is confident that his firm’s top-down approach really works, leaving it unconstrained by style considerations, for example. “If you get the big picture right, then everything else falls into place,” he says. “We’re active managers, so we tend to move quickly when we see an opportunity.”

Daly contends that asset managers that take a global approach to investment may win popularity as a result of recent pension fund experiences. “That style may be seen to be a bit more objective,” she says.

In the same vein, bottom-up stockpickers who concentrate on fundamentals could find themselves winning favour with pension funds, she adds. “But it will be a matter of time to see who comes through it.”

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