State Street eyes Irish pensions after BIAM buy

* Says Irish pension funds "under-served" by managers

* Growing interest in emerging market, LDI investments

By Cecilia Valente

LONDON, Jan 27 (Reuters) - Money manager State Street Global Advisors (SSgA) is chasing a slice of the 80 billion-euro ($110 billion) Irish pensions business to win mandates from retirement schemes forced to change their strategies to curb swelling deficits, an executive said.

Gregory Ehret, head of Europe Middle East and Africa (EMEA) at the investment arm of State Street (STT.N), said the takeover of Bank of Ireland's (BKIR.I) funds business had opened up a potentially lucrative market, where trustees are eyeing emerging markets to offset woeful returns from domestic investments.

SSgA announced in October that it would pay 57 million euros to acquire Bank of Ireland Asset Management (BIAM), gaining access to the country for the first time. [ID:nLDE69L0MF]

"Irish investors are remarkably under-invested in emerging markets," Ehret said, adding the local pension market has been "fairly under-served" by investment managers.

"What they are doing now and they were hardly doing in the past is diversifying (away) from Ireland," he said.

Irish defined benefit pension funds, like most of their global peers, have been hit hard by choppy stock markets in the developed world in the wake of the 2008 financial crisis.

More than 70 percent of defined benefit schemes in Ireland were in deficit at Oct. 31, data from the Irish Association of Pension Fund shows.

Compounding these problems, many schemes must also find extra money -- likely from higher-risk, higher-return emerging markets -- to cover growing liabilities as their members live longer, a phenomenon common to all Western countries.

Martin Haugh, a partner at the Dublin practice of pension consultant Lane Clark and Peacock, said funds "were always limited geographically" and some also showed "an element of Irish bias" in their investment choices.

"Emerging markets would have frightened the typical Irish pension fund trustee," Haugh said, pointing to the change in attitude that inspired the State Street strategy.

The sale of BIAM and other units of the bank was a condition of the European Commission's approval of Bank of Ireland's 3.5 billion euro government bailout as the Irish banking system fought to stave off collapse after years of reckless lending.

The Irish Association of Pension Funds has seen amongst its members "a continuing, growing interest in emerging markets to move away from a quite high allocation to traditional (Western) equity," a spokesman told Reuters.

But there are fears debut pension scheme investments in markets such as China, India and Brazil could take longer to execute if regulators stipulate conservative investments until the pension fund's financial position rallies.

"For diversification reasons they should be going into (emerging markets) but other factors are dominating at the moment and will continue to, probably for most of this year," Haugh said. ($1=.7296 euros) (Editing by Sinead Cruise, Greg Mahlich)