Overseas managers will use NPRF success to bid for other Irish funds

Word has it that some in the fund management industry are less than pleased with the outcome of the tenders for the management of the National Pensions Reserve Fund (NPRF) by the NTMA.

Of the €8 billion in the fund, only €1.3 billion was allocated to private-sector Irish fund managers, although this proportion rises to €2.4 billion if Auntie Mae's €1.1 billion euro-zone bond mandate is taken into account.

No doubt, there are big grins over at BIAM HQ at Leeson Street bridge after it picked up a half-portion of the €1.1 billion passive euro-zone equities mandate as well as €350 million worth of active pan-European equities. Add in the €400 million chunk of the CIÉ pension fund that BIAM picked up last month and it has been a decidedly good month for Chris Reilly.

Irish Life has taken criticism in the past for its investment performance and justifiably so. But it is a boost for the group's fund management arm to pick up a €420 million long euro-zone bond mandate from the NTMA as well as getting €400 million of the CIÉ Pension Fund for its consensus fund.

No doubt those Irish fund managers who lost out in the bidding for the NPRF and CIÉ mandates are bemoaning the nuisance that is the EU Public Procurement Directive, which means that no longer can competition for public sector pension mandates be confined to the chosen few from the Irish fund management industry.

It can be taken as read that Capital will build on its success in getting one-third of the CIÉ fund and a sizeable part of the NPRF to bid for other large public service funds when they come up for tender. Likewise State Street, Barclays, Putnam, Blackrock, Invesco, Goldman Sachs and Dresdner will no doubt point to their NPRF mandates when they pitch for other Irish pension fund management business.

For many years, the management of Irish pension funds has been a very cosy club. But trustees owe it to their members and pensioners to expand their horizons and hold a more extensive selection process involving both domestic and overseas fund managers.

Meanwhile, Irish fund managers must be casting their eyes at the €1.5 billion surplus held by the Irish credit unions. Phil Flynn's report on the credit unions this week was scathing about many aspects of the way they do their business, but he specifically identified this enormous surplus and how even a fraction of a percentage point improvement in returns would generate €1 million a year for the credit unions.

It may take some time for the management of that surplus to be contracted out, but when it does happen there will be ferocious competition.