IRELAND - The Irish Association of Pension Funds (IAFP) has urged the industry to look long term in light of its 7% or €7bn (US$10.4bn) downturn so far this month.
Chairman Patrick Burke was speaking in reaction to figures from Mercer showing the average pension fund was down around 5% or €5bn, year to date.
Burke said: “There has been a significant fall across the world in recent months, but markets will always fall and rise and for this reason long-term investors, such as pension funds, can afford to take risks.”
The total swing has amounted to around 9% as the average Irish pension fund was up 4% mid-year.
The Mercer report cited the relatively small Irish stock market as being susceptible to tremors from the US sub-prime crisis. The market has lost 15% of its value in November so far adding to a fall of 28% year to date.
Noel Collins, senior consultant, Mercer reminded pension fund investment managers of the benefits of a diversified portfolio: “Additionally, non-traditional asset classes, for example commodities and infrastructure, can give returns which are not so affected by falling equity markets.
“The weak US dollar alone would have knocked about 2% off the value of a pension fund this year, which is why we advise our clients to have strategic currency hedging policies in place.”
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