The Ireland Strategic Investment Fund (ISIF) would be “very interested” in small-scale public-private partnerships (PPPs), its investment director has disclosed.
Eugene O’Callaghan, who currently oversees investments at the National Pensions Reserve Fund (NPRF) prior to the full launch of the ISIF, also said that he was less interested in offering Irish small and medium-sized enterprises (SMEs) access to further loans than allocating some of the €6.8bn portfolio to equity investments boosting the economy.
Speaking at the joint Oireachtas committee on jobs, enterprise and innovation earlier this month, O’Callaghan spoke of the problem of attracting large institutional investors to some of the smaller scale PPP projects proposed by the Irish government.
“Financial institutions such as insurance companies and pension plans would typically write cheques of €100m or more each,” he said.
He added that smaller scale projects would be of interest to banks, but said there was also an opportunity for ISIF to support them.
“Certainly, on the smaller to medium-sized projects there is every possibility that there will be financing gaps in those and we would certainly be very interested in participating in the projects where such gaps might exist.”
Discussing the NPRF’s €500m commitment to three SME funds, made last year in anticipation of the launch of the domestically-focused ISIF, he noted that that Irish companies were currently “disproportionately” reliant on debt funding.
“In our view, the solution to excessive corporate debt levels is not necessarily more debt but greater use of other financing means such as equity, where the ISIF can particularly make a difference.
“Its flexibility to invest up and down the capital structure and over longer time periods means it can provide alternative funding options to complement those provided by traditional banking.”
O’Callaghan said the three SME funds had identified over 400 investment opportunities in the past year, but that only 45 had progressed to the stage where detailed proposals were drawn up by managers.
He echoed previous sentiment that the ISIF would look to be co-investor in a “suite of funds” to assist SMEs, but that the higher operational costs associated with ventures targeting small firms made it hard to “establish a commercial case” in favour of investment.
In an interview with the February issue of IPE, O’Callaghan said that the ISIF would have a dual bottom line of stimulating economic growth and investing on a commercially viable basis.
Minister for finance, Michael Noonan has previously said it was “essential” that the ISIF act as an alternative source of financing to a broad range of projects – including agriculture, construction and technology ventures.