Irish pensions reserve fund sets sights on local SMEs, infrastructure
IRELAND - Ireland’s National Pensions Reserve Fund (NPRF) is set to refocus its portfolio toward domestic investments in small and medium-sized companies (SMEs), as well as infrastructure and venture capital projects, the National Treasury Management Agency (NTMA) has said.
Recruiting for two investment analysts, the NPRF’s asset manager explained that there would soon be a change in the scheme’s discretionary portfolio - most recently valued at €5.3bn - with an increased domestic exposure.
It noted that, in the past, Irish assets comprised only a “small percentage” of the fund.
The NTMA said: “The NPRF will be seeking to source and complete investments on a commercial basis in areas that are of strategic long-term significance to the Irish economy - including infrastructure, venture capital and the SME sector.”
It said the investments would most likely be conducted through targeted investment funds, with direct investments “in suitable Irish opportunities” also a consideration.
A spokesman for the NTMA declined to comment on the proposed changes.
The reserve fund’s asset allocation currently invests contrary to its strategic asset allocation. According to its 2010 target, 49% of funds should be invested in equities, with more than half in global large caps.
At the end of September last year, however, only 28.3% of funds were invested in the stock market, falling far short of its 10% target for small caps - to which only 2.2% of its discretionary portfolio was allocated.
Its alternative asset allocation also failed to meet its target, with private equity accounting for 7 percentage points more than previously set.
Its infrastructure holdings were on target, according to 2010 standards, but will have increased since September in light of fund investments toward the end of the year.
News of the shift in strategy comes a month after minister for finance Michael Noonan announced a review of pension fund investments in Ireland.
During 2012’s budget speech, he praised the pension fund community for its €750m contribution to the country’s recovery - stemming from pensions levy payments, as well as tax relief changes.
But he said that changes to the supplementary pension system would be needed to guarantee long-term sustainability.
“This will include consultation on whether and to what degree pension funds might invest more in Ireland, rather than abroad,” Noonan added at the time.
Increasing schemes’ domestic exposure has been an issue for a number of years, with union SIPTU repeatedly calling on funds to be granted an exemption or rebate of the 0.6% pensions levy if they allocate funds for domestic infrastructure projects.
The NPRF itself late last year allocated €250m toward Irish Life Investment Manager’s €1bn Irish Infrastructure Trust, but the company’s director of investment development Patrick Burke said that, on the whole, Irish schemes lacked exposure to the asset class.
He told IPE: “As an asset class, it is typically under-allocated in Irish pension schemes, and pension schemes are, of course, at an advantage as long-term investors, as they are in a better position to manage liquidity issues than typical short-term investors.”
However, Burke - also chairman at the European Federation of Retirement Provision - said however that he did not expect funds would allocate “much above 5%” toward infrastructure in the near future.
The NPRF currently has €14.9bn in assets under management, with the remaining €9.6bn to be found in its directed portfolio, accounting for the state’s 99.8% and 15.1% stake in Allied Irish Banks and Bank of Ireland, respectively.
For more on the NPRF and infrastructure investment in Ireland, see the February issue of IPE.