Pension funds managed by AIB and Standard Life have been the worst hit by the recent falls in Elan's and AIB's share prices, a Mercer survey shows. Standard Life's year-to-date performance is down 3 per cent as a direct result of losses on the two stocks.
Elan was the single largest stock on the ISEQ, making up about 22 per cent of the index at the end of 2001. It lost some 65 per cent of its value in the first five weeks of this year. Exposure to Elan will be the key differentiating factor in the relative performance of Irish active balanced managers for the first quarter of 2002, Mercer predicts.
Mercer has just completed a review of the current exposures of all fund managers in the market to AIB and Elan: Bank of Ireland Asset Management (BIAM) is the only one to remain relatively unscathed. Exposure to Elan among the 10 largest fund managers varied from 4.3 per cent down to zero.
On average, the bottom line value of Irish pension funds has been reduced by 2 per cent since the beginning of this year. Last year, the value of the average managed pension fund fell by 5.7 per cent.
Mr Tom Murphy, head of Mercer investment consulting, said the situation was particularly disappointing for Irish pension fund trustees following the poor returns experienced in 2000 and 2001. "However, this loss is unlikely to immediately threaten the solvency of Irish pension funds," he said.
Stock selection was the key driver behind the relative success of BIAM in 2001, according to Mercer. The fund's US performance was strong, beating the index by 10 per cent. BIAM's defensive strategy of being underweight in equities paid off in 2000 and 2001. However, its UK equity holding underperformed indices due to telecoms holdings.
Speaking to delegates at Mercer's annual investment conference in Dublin, Mr Murphy said it was time pension fund trustees pro-actively addressed their funds' long-term strategic allocation to Irish equities.
