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Domestic investments net 4.7% gain for Irish sovereign fund

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The Ireland Strategic Investment Fund (ISIF), the republic’s sovereign development fund, has reported a 1.1% loss across its investment portfolio for 2018.

The fund said the performance reflected global declines across almost all major asset classes, with its global portfolio falling by 3.1%.

However, its domestically focused portfolio gained 4.7% during the year, meaning ISIF has averaged a 1.8% annual gain since its inception in 2014.

In 2017 the fund made a 4.3% overall investment return, including a 4.1% gain on its global portfolio and 4.5% on the Irish portfolio. 

ISIF’s portfolio was worth €8.8bn at the end of 2018.

The fund, the successor to the National Pensions Reserve Fund, has a statutory mandate to invest on a commercial basis while supporting economic activity and employment in Ireland – a so-called double bottom line mandate, utilises ISIF’s characteristics of scale, flexibility and a long-term investment timeframe.

As part of this, ISIF is gradually shifting the global portfolio into an Irish portfolio as investment opportunities in Ireland are executed and capital is drawn down from overseas assets.

By the end of last year, ISIF had invested €4.1bn in domestic projects. Co-investors had backed the same projects with a further €7.5bn giving a total of €11.6bn committed to projects in Ireland.

Following a review by the country’s finance ministry the fund has revised its investment strategy, introducing a €3bn five-year programme to transition from its existing broad investment strategy to focus on five key areas: regional development, housing, indigenous businesses, climate action and Brexit.

 Eugene O'Callaghan, director, Ireland Strategic Investment Fund

Credit: Patrick Frost

ISIF director Eugene O’Callaghan unveils the fund’s strategy at December’s IPE Conference in Dublin

As part of this, ISIF said it would seek to address shortfalls in capital markets to provide finance for up to 25,000 homes by 2025.

In terms of climate action, ISIF planned to build on its existing investments in renewable energy and carbon emission reduction to support Ireland’s transition to a low-carbon economy.

The fund said it would seek out commercial investments in businesses that may be adversely affected by Brexit, to enable long-term product and markets diversification.

However, the fund said it would continue to pursue investment opportunities that were suitable for its “connectivity fund” sub-portfolio, which includes existing investments in airport and port infrastructure and projects enhancing Ireland’s global data and IT connectivity.

The fund would also selectively take advantage of compelling opportunities that were consistent with its mandate and did not fit under the priority themes, it said.

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