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Ireland’s National Pensions Reserve Fund (NPRF) is to divert 8% of its equity holding into real estate over the next five years after a strategic review revealed its cautious asset allocation formula was failing to maximise returns.
In 2001 the NPRF Commission, which is appointed by the finance minister to set the fund’s investment strategy, allocated 80% to large cap equities and 20% to bonds. But in a revised strategy document published last year the commission opted for property as a potential source of long-term returns.
Spokesman Adrian O’Donovan said: “Our strategy is to increase the fund’s returns without substantially changing its risk profile.” By 2009 the fund plans to have invested €2bn indirectly through international property investment vehicles, including the Asia/European focused Morgan Stanley Real Estate Fund II and the Axa French Development Venture II.
According to 2005 year-end results, the NPRF has already invested €402m in the first phase. It plans to invest 50% in European property, 35% in North America and 15% in Asia-Pacific.
In addition to real estate, the fund has allocated 8% to private equity and 2% to commodities. Because liquidity is not a issue - the fund receives 1% of GNP from the exchequer and there will be no draw-downs before 2025 - it can exploit less liquid asset classes. According to O’Donovan the revised allocation percentages are a result of “modelling and judgement”, rather than external advice.
The fund grew by €3.6bn at the end of 2004 to €15.3bn (11% of GNP) at the end of 2005. Partly thanks to a rally in global equity markets, it earned a return of 19.2% in 2005, excluding the government’s contribution of €1,320m.

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