Biam has, like all Irish pension funds, felt its share of equity-linked pain in recent months. Data from Mercer show that BIAM's managed pension funds lost 6.8 per cent of their value over the second three months of this year. The dip, while hardly cause for celebration, was less severe than losses experienced by BIAM's competitors however, some of which posted falls greater than 10 per cent.

Chances are that some pension fund managers have been getting a bit of an earache from clients in recent months, as the people whose money they look after anxiously seek reassurance on their retirement nest egg.

It is hard to argue with the concern: this is, after all, one of the deepest equity crises since the second World War and the markets did hit a five-year low just a week ago. All in all, it isn't a pretty picture, but if you happen to be in the pensions business, it is an unfortunate part of life.

"We take it very seriously when the markets fall," says Mr Pat Lardner, head of institutional business with Bank of Ireland Asset Management (BIAM), the man in charge of how assets under management are invested.

Identifying the root of the problem is simple enough: the typical Irish pension fund allocates about 70 per cent of its assets to equities and, when global stock markets fall by almost 30 per cent in three months, obviously the effects would be widely felt.

The tricky part then comes in working out why one set of fund managers succeeds in losing less or more than the average, which in this case was 10 per cent. This is where asset allocation, the process which decides where a fund invests the money available to it, suddenly becomes exciting.

In simple terms, pension fund managers have four types of asset to choose from: equities, bonds, property and cash, with risk and potential reward varying from class to class, and equities tending to produce highest returns over the longer term.

Mr Lardner says that a typical BIAM pension fund allocates between 50 and 80 per cent of its assets to equities, with the level of that allocation depending on optimism about the markets. "Sixty-five per cent is a sensible place to be long term," says Mr Lardner, who describes his team's approach as "conservative and prudent".

Over at AIB Investment Managers (AIBIM) meanwhile, the "normal" equity allocation is between 60 and 70 per cent of a fund's assets, with the remainder divided between bonds and property.

AIBIM's funds have not come off too well in recent months, with Mercer's second-quarter figures revealing an 11.7 per cent fall in value. Over a year-long period, this loss extends to 18.3 per cent, but when a 10-year view is taken, an 11.1 per cent gain is registered. BIAM, over the same 10-year period, saw its funds rise by 12.9 per cent, thus bringing the two competitors closer than might initially be imagined and neatly illustrating the long-term nature of pensions investment.

Approaches to asset allocation will differ from manager to manager, with some choosing to start with the macroeconomic picture and work their way back down and others beginning with companies and moving up.

Mr Frank O'Riordan, director of portfolio management at AIBIM, describes the company's management approach as a "growth style", a technique which places emphasis on earnings over time rather than what's happening in the market today.

BIAM tends to place supreme emphasis on news emanating from individual quoted companies. Of the company's most recent three-month performance, Mr Lardner simply says: "We would have been positioned a little bit more defensively than other people." Both management companies formally examine their asset allocation policies once every month, while day-to-day discussions between managers will also occur.

At BIAM, the portfolio has remained relatively stable for the past 18 months, despite the market turmoil which has characterised the period. In AIBIM meanwhile, the current trough in global markets is being treated as an opportunity, with the company actively buying equities as others choose to wait. "There is no absolute nirvana in asset allocation," says Mr O'Riordan.Ultimately, it's a question of balancing risk against reward in a world where keeping an eye on variables is the name of the game.

"No one thing acts in isolation," says Mr Lardner.