The E11.69bn National Pensions Reserve Fund has targeted an 18% allocation to property, private equity and commodities by 2009 – but it will not invest in hedge funds for the moment.
Chairman Donal Geaney called the move a “substantial development of the NPRF’s strategic asset allocation”.
“The target allocation sets out the framework within which the NPRF will operate over the next five years,” he said. “Investment in property and private equity will take place on a phased basis to 2009 as we construct high quality, diversified portfolios.”
The target asset allocation will be 8% to both property and private equity and 2% to commodities. The total quoted equity allocation will be 69%, with bonds accounting for 13%. “This allocation builds on the initial investment strategy of 80% to equities and other real assets and 20% to bonds, made in 2001,” the scheme said.
Geaney said the shift in allocations was “in line with international best practice”.
The NPRF made a 9.3%, or E951m, return on its investments in 2004 – taking its total value to E11.69bn.
The fund said a key factor in its investment strategy is its long-term horizon.
“With no drawdowns from the fund before 2025, the NPRF can exploit the short-term volatility and lack of liquidity inherent in some of its chosen asset classes in anticipation of the excess return available to investors as compensation for these factors.”
The NPRF added that it has decided not to invest in hedge funds for the moment. “This is because of the rapid growth in the asset class which could crowd out successful strategies, the difficulties in identifying consistent top quartile managers and the lack of regulation of the sector.”
“In the longer term and with developments in these areas of concern, the NPRF Commission will examine the asset class again.”