Irish scheme assets drop not as bad as expected –
IAPF
31 March 2009
Written by Francesca Fabrizi
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.
