Open Dissent by Mike Soden Page B

ask what percentage of the future profits of the banks must be allocated to pension funds. That being said, what effect would action of this nature have on the overall performance of companies and their ability to attract new investors? Fundamentally, if the banks recover, will they be able to generate sufficient profits if they are forced to sell their most profitable assets at this time to generate enough capital to meet the Regulator’s requirements?
    Whether people benefit from personal pensions or major institutional schemes that have taken decades to build, all pensioners are viewed as either long-term investors or traders. For most people, the strategy determined to provide an annuity will take into account many, many factors. The sophistication is extraordinary. It deserves to be as it provides security for the investor for the remainder of their days. On the other hand, an individual who is administering his own fund might be lucky enough to have a good financial advisor but in many instances may only bearmed with some financial periodicals and the daily business section of the newspaper. The different skills of investors in managing money are evident in terms of performance and results. But the question remains as to whether we should have an investing mentality or a trading one when it comes to our pension funds. It is fair to say that few people have the training or experience to be traders. In fact, most people do not have the time to be active in the markets, as this concept of trading would imply. However, it is essential for people to stay on top of their pension performance and have a Plan B in the event they observe a potential erosion in the value of their investments.
    People so often abdicate the management of their pensions to others deemed to be better equipped for this activity. Those who have done so in the recent past would have enjoyed the pleasure of hearing the professionals tell them that they have achieved a return on investment marginally above an index or, if unlucky, some percentage below an index. It is only when they tell you that the market index has dropped by some 30 per cent or more that you wake up to the fact that you are a lot poorer than you thought. Paying a fee for this report is galling, like pouring salt in the wound. If you wish to measure performance by an index perhaps you should invest in an index fund or pay the broker only a percentage of your gains when they arise and nothing if there are losses recorded. Investment strategies that encourage us to take a passive position with our funds, meaning we wait to receive a quarterly or half yearly report on the progress of our investments, should bereconsidered. However, a person might feel trapped in this situation as they might feel that at this stage in their mature life it is possibly too late to become market aware and savvy.
    All the foregoing has been raised because of the enormous volatility that exists in the equity, debt, commodity, foreign exchange, derivatives and all other markets. Postcrisis, will the volatility be reduced and will our investments in banks, corporations or sovereign states be secure so that as pensioners we do not have to worry about our security? The 70+ per cent loss on the Irish stock market, the massive haircut NAMA is applying to property loans from the banks, the fall in the value of certain collectables and the enormous volatility being experienced in the foreign exchange markets give one little reason to believe that a passive investment strategy for one’s funds should be adopted or depended upon.

C HAPTER 7
Looking Abroad
    Within the Irish market it is important that we consider the alternatives to ‘too big to fail’ and ‘too small to save’. The actions being taken by our Government in ensuring we have a strongly capitalised banking system are not going to be much good without a clear vision of what success looks like from the perspective of all the constituents