Kevin Murphy was responsible for overseeing the transformation of what has just been named Ireland's top pension fund manager, writes Siobhán Creaton, Finance Correspondent

Kevin Murphy, the head of Irish Life Investment Managers, postponed a trip to Cheltenham this week to collect a much-coveted gong.

On Tuesday, Irish Life's fund management business was named as Ireland's top pension fund manager in 2004. After a 10-year famine, the award is assured pride of place in Mr Murphy's office.

"I have made the ultimate sacrifice in having to forgo going to Cheltenham, but I'm not complaining," he says.

Mr Murphy has overseen the transformation of the business over the past decade. The company, which was the Republic's biggest fund manager, is delighted to be back on top of the pile having lingered at the bottom of league tables for so long.

In the dark years, it lost many customers as frustrated companies switched their pension funds to fund managers that were yielding much stronger returns.

"For six or seven years we were losing €200-€300 million worth of business a year. This stopped when our performance began to improve," Mr Murphy explains.

In the past 12 months, more than €1.3 billion of new business came to the group and it will hope this award will help to win even more new clients.

"When funds are underperforming you get no sales and you lose business. When things begin to recover you move into the second phase, where you are still losing money but are not winning any new business and then you move into the third phase, or the dream phase, where you are winning new business and not losing any," says Mr Murphy.

This has been the fund manager's experience of the business, which he says demands resilience and patience.

"It is a long game. Underperformance is inevitable," he says. "It's something all fund managers go through."

It can take some time to realise why things went wrong and how best to position the business for future success.

"If you have a poor five-year track record it will take five years to improve. We focused primarily on having the right products."

In the late 1990s, pensions managed by Irish Life were invested in a managed fund, which contained a mixture of equities, bonds, property and cash. Fund managers would seek out value, buying the most attractively priced of these assets and actively manage them to yield the best returns.

Pension fund trustees were always delighted when these funds performed strongly but increasingly began to question the strategy and the thinking behind the various investments selected by the fund manager.

"Increasingly, you needed a more scientific approach to fund management. You had to outperform and you had to prove that you did it.

"You couldn't tell trustees that you outperformed simply because you picked certain stocks. They wanted an explanation about the thinking behind the stock selection," he says.

Internationally, fund managers were finding success by investing in consensus funds, vehicles set up to track the average management fund and typically aiming to slightly outperform it.

"There was great resistance towards adopting it here initially. Many people felt that the trustees wouldn't like it."

Mr Murphy believed this unease would be the greatest hurdle to overcome. However, assembling the processes and putting the funds in place proved a far greater challenge.

"We had to set up a separate team and to buy every stock to track 10 indices. This turned out to be the hardest part of the exercise," he says. "We had to value every equity and could only pick stocks once it was established that they were cheap. And we had to present our model to the trustees."

Mr Murphy believes that if Irish Life had concentrated simply on managing balanced funds it could still have been struggling to win back clients by the time its performance improved, as the consensus approach had, by then, found favour with the pension funds.

In offering this type of fund management approach, Irish Life competes with many of the world's leading institutions.

In the longer term, Mr Murphy says that Irish fund managers will find it harder to hold their own in this market and will have to focus on developing certain niche skills while outsourcing other aspects to those specialising in these areas.

"Ireland's fund management industry will inevitably be smaller in 10 years' time and those that survive will have to become specialists."

This week though he will enjoy the glory.