Asset AllocationJanuary 8, 2014

National Pension Assets Help Ireland to Recovery

<em>The Emerald Isle is using pension reserves to pull itself out of economic gloom.</em>

Reported by Featured Author

(January 8, 2014) — The Irish National Pension Reserve Fund (NPRF) has committed €1.3 billion to revive its recovering economy with much of the cash injected over the past 12 months, the agency has said.

In its latest annual review, the National Treasury Management Agency (NTMA) said capital from the national pension fund had been invested in ventures that would strengthen the country, including a €375 million investment in three funds that provide €850 million of equity, credit, and restructuring/recovery investment for Irish small and medium-sized businesses.

“The NPRF played a significant role in the development of the funds, all of which have established a local presence, and is a cornerstone investor in each alongside additional investment from third-party investors,” the agency said.

The pension fund has also committed large amounts to infrastructure projects on the island, including a bridging loan of €250 million to Irish Water to cover start-up costs and the initial phase of water meter installation.

The fund was forced to bail out the nation’s banks in 2010 as the financial crisis and other home-grown issues took their toll. Its value had reached €23 billion but was reduced to just €6 billion after rescuing the institutions. The NTMA then took on more than €70 billion in toxic assets from these failed institutions.

Since mid-2011, the fund has been compelled by the government to preserve capital by reducing equity holdings and turning its investment outlook to its domestic needs.

Over 2013, the discretionary portfolio of the NPRF, which does not include these “bad bank” assets, made a 6.3% return. It stood at €6.8 billion at December. Since inception in 2001, the fund has made an annualised return of 3.9% per annum.

The NPRF also assisted other government departments to secure infrastructure projects with funding from larger European organisations through the allocation of stand-by capital.

NTMA Chief Executive and aiCIO Power 100 member John Corrigan said 2014 had already started well with only the second long-term bond sale since the financial crisis taking place yesterday. Yields on the instruments were substantially lower than previous issuances since the crash.

Looking ahead to 2014, Corrigan said: “A particular priority is to complete the conversion of the National Pensions Reserve Fund into the Ireland Strategic Investment Fund (ISIF) which will invest on a commercial basis in areas of strategic importance to the Irish economy. Work on the ISIF business plan is at an advanced stage.”