CURRENT ACCOUNT: AIBIM might have been forgiven for believing that it would retain at least one of the mandates. But sadly for Percy Place, not so!

March has not been a very pleasant month for the people at AIB Investment Managers (AIBIM). In one fell swoop, AIBIM lost 10 per cent of its funds under management when the trustees of the CIÉ pension scheme in effect sacked AIBIM as the sole manager of its €1.2 billion pension fund.

Informed sources have told Current Account that AIBIM was resigned to losing some of the fund once it was made clear last January that the fund was going to be split. Pure financial prudence meant that CIÉ having all of its €1.2 billion assets dependent on the investment decisions of a single fund manager was no longer appropriate. Far smaller funds than the CIÉ pension fund have two and sometimes three fund managers.

At first it was thought that CIÉ would split the fund into two €600 million mandates but, finally, the trustees decided that it should be split into three €400 million mandates - one passively managed and two actively managed mandates.

Competition for the mandates was fierce, with 27 separate responses to the tenders sought under the EU Public Procurement Programme. A series of beauty parades was held, before the CIÉ board finally made up its mind last week.

The result? Irish Life was picked for the €400 million passively managed mandate through its consensus fund, while the two €400 million active mandates went to Bank of Ireland Asset Management and US fund management group Capital International.

Given the overseas interest in the CIÉ fund mandates, it was no surprise that one of the mandates went overseas - the National Pensions Reserve Fund (NPRF) has contracted out a large chunk of its €7 billion fund to Barclays Global and a BIAM/State Street joint venture.

But the NPRF fund is new money and, as such, has little impact on the domestic stock market. Capital, however, will be taking over management of €400 million of CIÉ funds - a large chunk of which is undoubtedly invested in Irish equities.

The average Irish pension fund has 18 per cent of its funds invested in Irish equities - a far higher allocation than the 2 per cent weighting the Irish market warrants within the euro zone.

Despite the gradual reduction in exposure to Irish equities, the average Irish pension fund manager still has a bit of a grá for Irish stocks. It might be reasonable to assume that Capital, located in the US, won't have the same emotional attachment to Irish stocks.

If the €400 million Capital is going to manage has the current average 18 per cent allocation to Irish equities then some €72 million of its mandate is tied up Irish stocks. If Capital decides to gradually reduce that Irish exposure - and there is no earthly reason why any pension fund with assets and liabilities denominated in euros should be exposed to a single stock market - then there are serious implications for the Irish stock market.

And if Capital's arrival in the Irish market is a precursor to a larger-scale invasion by overseas fund managers, then there may be implications not just for the Irish stock market but also for the domestic fund management industry.