Ireland’s government has been warned about the risks associated with its sovereign development fund and projects funded by its predecessor, the National Pensions Reserve Fund (NPRF).
In its annual assessment of the Irish economy, the OECD noted the launch of the Strategic Banking Corporation of Ireland (SBCI), funded by the NPRF, which has since become the Ireland Strategic Investment Fund (ISIF), and used as a means of increasing the amount of lending to small and medium-sized enterprises (SMEs).
“Both the SBCI and the ISIF should be monitored closely given the implied fiscal risks,” the OECD report warned.
It noted that the SBCI, which received funding from both the NPRF and Germany’s Kreditanstalt für Wiederaufbau, was meant to “foster competition”.
“It is important to ensure the SBCI and the ISIF do not crowd out private financing,” the OECD report added.
ISIF’s investments are meant to act as a catalyst for additional private investment, and the fund regularly discloses the amount of third-party capital committed alongside its investments.
Its director, Eugene O’Callaghan, told the current issue of IPE the fund’s challenge was now investing three-quarters of its €7.6bn portfolio by its target date of 2020.
“The biggest challenge is deployment – and deployment in a way that we don’t big up the price of assets in the Irish market against ourselves,” he said.
In July, the fund outlined its investment strategy, which will see it target real assets, venture capital investments and private equity.
In late July, it also announced that it would back a €500m residential property venture, which aims to extend credit to domestic residential developments.