Pension fund to buy direct stakes in Irish firms
Some of the €5.3bn remaining in the National Pension Reserve Fund can be used to be buy direct stakes in Irish companies, the NTMA has decided.
The agency has begun recruiting corporate finance advisers to identify investment opportunities and while most of the funding is likely to be invested via specialist funds, the NTMA has decided direct investments may also be considered.
The pension fund contains a total of €14.9bn, but €9.6bn of this has already been invested in AIB and Bank of Ireland. The NTMA is now developing plans for the remaining €5.3bn.
The focus will be on Irish companies involved in infrastructure, and the SME sector. Investing pension funds in direct equity stakes would represent a major departure. The €5.3bn is known as the discretionary fund.
At present only Enterprise Ireland is able to take substantial stakes in private companies and although the pension fund invests in quoted shares from around the world, these were rarely in Ireland.
Late last year the pension fund agreed to make a contribution towards a €1bn fund being put together by Irish Life Investment Managers and Australia's AMP Capital.
The NTMA is now seeking experts who can identify investment opportunities, but also find potential co-investors.
Those being recruited will complete due diligence on any potential investments.
Those recruited are expected to find individual transactions and to deliver results this year.
A recruitment advert states: "It is expected that in the future, investment of the discretionary portfolio is likely to focus more on investment in Ireland than has been the case in the past.
"The pension fund will be seeking to source and complete investments on a commercial basis in areas that are of strategic long-term significance to the Irish economy." The NTMA's role in the Irish economy is expanding at present, with the supervision of all major semi-states now coming under its ambit, via NewEra.
The agency is also involved in preparing Ireland for re-entry onto the European bond market, where Irish bond yields remain at elevated levels.
The agency is expected to "dip its toe into the water" later this year by issuing short-term treasury bills. It hopes then to expand this programme into more long-term bond issuances.
The pension fund is sitting on sizeable losses on its banking investments to date, it emerged last year. The investments have to be valued at today's 'mark to market' prices and this has triggered the paper losses. The pension fund expects to recoup value from the investments over the long term.
The Government's long-term intention is to sell the State's holdings back onto the market. Bank of Ireland's stake is seen as the most likely to be sold first, as it already has over 30pc of its equity held by private investors, mainly from North America.