IRELAND - The e11.69bn National Pensions Reserve Fund (NPRF) added property, private equity and commodities to its portfolio in 2004 as part of a five-year strategic asset allocation plan. This year, the fund plans to begin the first stages of implementation.
Chairman Donal Geaney said: “The target allocation sets out the framework within which the NPRF will operate over the next five years. Investment in property and private equity will take place on a phased basis to 2009 as we construct high quality, diversified portfolios.”
The fund’s strategic asset allocation includes 63% large cap equity, 4% small cap equity, 2% emerging markets equity, 8% property, 8% private equity, 2% commodities and 13% bonds.
The NPRF, which earned a return of 9.3% or e951m in 2004, said it would also invest in public private partnerships (PPPs) in Ireland on an opportunistic basis. This allocation builds on the initial investment strategy of 80% to equities and other real assets and 20% to bonds, made in 2001.
“Since then, we have been considering new asset classes incrementally and have already made allocations to small cap equities, corporate bonds, property and PPPs,” Geaney said.
“In 2004 we accelerated this and evaluated all prospective asset classes with the objective of increasing the NPRF’s prospective return without substantially changing its risk profile. The approach adopted is in line with international best practice and we reviewed the strategic asset allocation of high performing peer funds in assessing the benefits in the NPRF’s case.”
Geaney said that e200m had been available for investment in Irish PPPs since 2003 and that the fund would add to this “should opportunities arise”. While suitable projects had been slow to materialise, progress had been made recently with the NPRF joining a consortium tendering for the M50 motorway upgrade, he added.
The NPRF said it had decided not to invest in hedge funds “for the moment”.
“This is because of the rapid growth in the asset class which could crowd out successful strategies, the difficulties in identifying consistent top quartile managers and the lack of regulation of the sector,” the fund said. “In the longer-term and with developments in these areas of concern, the NPRF Commission will examine the asset class again.”
Geaney said 2005 promised to be another active year as the NPRF began to implement its investment strategy.
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