Resilience Is the Watchword for Bank of Ireland CIO Paul Droop

As an investment consultant in Towers Watson & Co.’s Dublin office, Paul Droop spent eight years telling Irish pension plans what they should do with their money. Since June 2011 he’s been putting his ideas into practice at Bank of Ireland’s €5.3 billion ($6 billion) pension fund.

Droop has taken a risk factor–based approach to diversifying the fund’s exposures. The aim, he says, is “to build a portfolio that is resilient to as many possible things that could happen in the world.” To that end, he has tilted the fund’s 17 percent credit allocation from core Europe to global mandates, grown private equity to 4 percent (with a target of 5 percent) and moved into such new asset classes as loans, infrastructure and reinsurance, including catastrophe bonds. “We can feel pretty confident about the resilience of those in the face of a market sell-off of equities,” he explains. Another new area is secured income assets, which for Bank of Ireland means a 5 percent allocation to long-lease real estate, which Droop sees as an attractive alternative to bonds. The fund has an additional 10 percent invested in real estate — both listed and private — and infrastructure.

An Australia native, Droop, 51, earned a bachelor’s in economics from Macquarie University and an MSc from University of London’s Birkbeck college. He worked as an economist at the old County NatWest and at InterContinental Hotels Group before moving into the pension business.

Bank of Ireland aims to fully de-risk its pension by 2040. That means evolving into a fully liability-matched portfolio, up from 35 percent today. Droop says the bank’s so-called Journey Plan seeks to generate strong returns now with an eclectic and opportunistic approach: “How would I build a portfolio if I couldn’t make any assumptions?”

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