Using the Ireland Strategic Investment Fund’s (ISIF) assets to pre-fund the country’s pension liabilities should not be ruled out, the head of the Irish debt management office has said.
John Corrigan, outgoing chief executive at the National Treasury Management Agency (NTMA), said pension provision remained on the government agenda, despite last year’s decision to transform the National Pensions Reserve Fund (NPRF) into the ISIF, severing its ties with the pre-funding of state pension liabilities.
Speaking with IPE at the fringes of the Mandarine Gestion investment conference in Munich, Corrigan said he was hopeful the ISIF would become an “evergreen fund”, echoing government views that it could act as a perpetual investment vehicle to boost the economy.
The government nonetheless retains the ability to use the ISIF for a future banking bailout, with the NTMA (Amendment) Act 2014 giving the minister for Finance the ability to invest assets in “specified securities of a credit institution”.
Corrigan also said the government had yet to decide whether the assets within the NPRF’s €13bn directed portfolio – used to support Allied Irish Banks and Bank of Ireland during the financial crisis – would eventually be included in the ISIF, which is set to be funded with the €7bn directed portfolio.
However, he warned against seeing the repurposing of NPRF assets to fund the ISIF as the government neglecting pensions issues.
“I do think the whole question of pension provision remains on the government’s agenda because we have a huge pension fund sector in Ireland that, it’s fair to say, is not in the best shape,” he said.
“That will have to be addressed, and so I would not discount the possibility this fund might one day revert to its original role as a pensions reserve or buffer fund.”
The current government has pledged to publish details of reforms to increase the coverage of second-pillar pension savings by the end of 2015.
The success of any such reform has been questioned by the Irish Association of Pension Funds, which said recent policies – including the use of NPRF assets to fund the bailout – would leave savers questioning how safe their pensions were.
Corrigan also spoke about the challenge of measuring the economic impact, and not just financial performance, of the ISIF’s investments and said the incoming investment committee would be discussing the matter.
“We do have a wish-list of sectors to focus on we feel will have the greatest multiplier effect – but that is really about narrowing down the universe, and our real job is to bring our commercial acumen to bear in making investments that generate good returns regardless of the sector,” he said.
He added that co-investing with other institutions or acting as a cornerstone investor would lend “peer group validation of the commercial viability of any investment”, as well as help the fund to leverage assets to “get the best bang for our buck”.
Ahead of the ISIF’s official launch, expected next month, the NPRF has been making a number of commitments, including to a suite of funds lending to small and medium-sized enterprises and a joint venture with the China Investment Corporation.
As of the end of June, it had committed €1.2bn of its €7bn portfolio to upcoming projects.