Irish funds 'slow to diversify'

Irish pension funds have been slower than their European counterparts to diversify into assets other than equities, according to a survey released yesterday.

Mercer's European survey of pension fund asset allocation says Irish funds, along with their British peers, remain the most heavily invested in stock markets. Large Irish funds have an average of 60 per cent of assets invested in shares, according to Tom Geraghty, head of Mercer Investment Consulting in Ireland. That figure rises to 78 per cent when smaller funds are included.

He acknowledged that this was due partly to Irish funds' traditional equity bias compared to pension funds in other European countries where fixed interest investments - government and corporate bonds - tend to dominate.

The survey of more than 570 European pensions funds with a combined €364 billion in assets under management showed that investment in alternative assets - property, currencies, private equity and hedge funds - was increasing across Europe.

It also identified liability driven investment and interest rate hedging strategies as the biggest potential growth areas as pension fund managers look to match asset performance with specific impending liabilities.

Irish pension funds are increasingly moving away from the traditional "balanced" approach to investment, according to the report. This move to specialist fund managers has also increased the use of international fund managers. While some Irish funds are looking at alternative asset classes, they are less adventurous than their European peers in this area.

Ireland's attachment to property is also evident in the survey with almost all Irish funds having exposure to the booming sector, according to Mercer.