Irish pension scheme assets fell by 23% in 2008, the Irish Association of Pension Funds (IAPF) has reported as part of its annual asset allocation survey, which, says the association, is less than might have been expected given recent market conditions

At year end, assets under management amounted to EUR 66.7bn compared with EUR 86.6bn at the end of 2007, which brings the total value of assets under management by Irish pension funds almost as low as 2004 levels (EUR 62.3bn).

The more surprising finding, says Jerry Moriarty, director of policy at the IAPF, is the strong increase in allocation to cash, which rose from 3.8% in 2007 to 11.4% in 2008: "This dramatic increase is a surprise although we think while some investors have switched to cash there is also a lot of new money going into cash, more for tactical rather than strategic reasons.

"People are either waiting to see what happens with the markets or they are re-thinking their long-term investment strategies and so sticking with cash in the meantime.

"If people are putting money into cash until the markets recover, then that's not wise as you are going to end up buying in at a higher price. But if you are putting money in cash while you are thinking what your long-term strategy might be - and we are certainly seeing a move away from equities - then it is more understandable."

The other big surprise is the increased move towards alternatives, to which Irish pension funds have increased allocations from 2.3% to 7.1% during 2008 in a bid to either reduce risk or increase returns. This was made up of 0.3% in forestry, 0.1% in hedge funds, 0.1% in venture capital, 0.6% in direct currency holdings, 0.2% in tactical asset allocation, with 0.6% in derivatives used for hedging , plus a remaining 5.1% in other assets.

The IAPF's survey also highlighted that the move towards defined contribution (DC) was continuing with the proportion of assets managed for these schemes doubling in two years. "This is the way things are going and all the increases we have seen in recent years have either been in public sector schemes or in DC and clearly no increase in public sector DB," added Moriarty.

Share Story: