Smurfit made killing trading Irish bonds during crisis
Tycoon felt they were 'far too cheap'
Packaging tycoon Michael Smurfit has made a fortune on Irish government bonds after putting his money into these investments when most people ran scared of them.
Speaking exclusively to the Sunday Independent earlier this month, the Monaco-based septuagenarian said that his belief in the Irish economy prompted him to invest in Irish government bonds.
"Ireland will prosper again and it will be successful again and this nightmare which we are all having will pass," said Smurfit. "Things will turn around – of that I have full confidence. In fact, I can tell you that I made a bet on Irish government bonds because of my belief in that and I have done very well. I just felt the bonds were far too cheap."
Smurfit's bet has clearly paid off. The 2020 government bond was trading at 60c in summer 2011, according to Dermot O'Leary, chief economist with Goodbody. It is now trading at 112c – almost twice what it changed hands at two years ago.
"The 60c price for that bond in summer 2011 was the lowest price you could have got," said O'Leary. "At that point and time, there was a fear that Irish government bonds would be haircutted. Greek government bonds were haircutted at that time, and Ireland looked to be going in the same direction. But since then, Irish debt levels came down, our banks became better capitalised and a large US fund – Franklin Templeton Investments – started to invest in Irish government bonds. That all helped improve sentiment."
Franklin Templeton Investments – whose vice-president Michael Hasenstab is one of the most successful fund managers in the world – has snapped up about €8.5bn of Irish bonds over the past two years. The Irish bond market has climbed 46 per cent over the past five years. Hasenstab described the Republic's economic turnaround as "probably one of the investments of the decade".
Investors in the country's bank bonds also made hay as senior bondholders were repaid by the State when the banks hit the skids.
Recently, the Sunday Independent revealed that Bill Gates owned tens of millions of euros in Irish bank bonds through his Bill and Melinda Gates Foundation. These holdings included bonds in Anglo Irish Bank, Irish Nationwide and Bank of Ireland. Last week's surge in the Microsoft share price saw Gates return to the top of the list as the world's richest man.