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July 31, 2006 at 08:00 PM
DUBLIN, Ireland (HedgeWorld.com)–Ireland’s National Pensions Reserve Fund is considering investing in hedge funds, according to a spokesman of the National Treasury Management Agency. The NTMA, which has been appointed manager of the fund through April 2011, has already announced that it aims to have 18% of funds under management invested in alternative assets by 2009.
Founded in April 2001 as the result of an act of parliament passed the previous year, the fund is controlled and managed by the National Pensions Reserve Fund Commission, which is required to perform its functions through the manager. Its mandate is to meet the majority of the costs of welfare and public service pensions from 2025 onwards when these costs are expected to rise sharply as a result of increasing life expectancy and lower birth rates.
The government has undertaken to invest 1% of GNP in the fund annually, and no withdrawals can be made from it until 2025. It is unfettered by matching constraints, and investment policy is therefore much more flexible than at other pension funds, state funded or otherwise. Last year the fund earned 2.41 billion euro, or 19.6% on its investments. After a 1.32 billion euro contribution from GNP, the fund had 15.4 billion euro at year end, and as of the end of June, the fund had 16.35 billion euro under management.
In his introduction to the NPRF annual report, published last week, Chairman Paul Carty noted that “the biggest risk the commission could run would be to take an overcautious investment approach and thus reduce the fund’s potential contribution to Ireland’s increasing pension costs.”
Over time, the fund’s investment options have come to include small caps, emerging market equities, private equity, commodities, real estate and forestry. Mr. Carty says exposure to these asset classes will increase the fund’s potential return while diversifying its risk. The fund also intends to integrate environmental, social and governance policies into its investment process and signed the United Nations’ “Principles for Responsible Investment” in April this year.
