Irish pension equity exposure among highest in Europe, says survey
Irish and European pension funds are managing the risk in their portfolios by diversifying their investments and placing more money in alternative assets, according to a new survey by Mercer Investment Consulting (MIC).
The survey of more than 570 European pension funds with €364bn assets under management also found that, as well as reducing risk, pension funds in the Ireland and the UK have the highest exposure to equities in Europe, at 60% and 62% respectively.
Property is the most popular alternative to equities and bonds, with virtually all Irish funds having some exposure to property compared to 68% in Switzerland and 41% in the Netherlands.
“Property has been a long-standing alternative investment to equities and bonds for pension funds in Ireland,” said Tom Geraghty, head of MIC in Ireland. “With prices having risen strongly in the Irish property market over the past decade, we are now seeing much greater interest in international investment as pension funds seek to diversify and enhance returns."
25% of UK funds invest in this asset class, compared to 62% on average in Continental Europe and Ireland. UK pension funds have reduced their equity exposure from 68% three years ago, at a rate of two percentage points a year.
At the other end of the spectrum, French pension funds invest just 28% in equities on average while Germany, the Netherlands and Switzerland invest 31%, 33% and 33% respectively. Funds in these countries have correspondingly higher allocations to bond markets.
“Irish pension funds continue to have significant exposures to large cap equities and have been a little slower than their European counterparts to diversify into other alternative asset classes,” said Geraghty.
“Part of this may be a legacy issue as Irish funds have traditionally been more equity biased than funds in other European countries, although allocations are falling gradually year on year.”
