Recovery in action: Irish SWF liquidates

The portion of Ireland’s sovereign wealth fund where investments can be made at the direction of the Minister for Finance, directed investments, is now considerably bigger than the fund’s discretionary portfolio, following a further €4.5 billion liquidation in April. This liquidation was at the direction of the minister to provide the €10 billion sum of the State’s €17.5 billion contribution to the €85 billion EU/IMF program of financial support for Ireland.

After this contribution the value of assets in the discretionary portfolio of the National Pensions Reserve Fund was reduced to €9.8 billion in March and further reduced in April to €5.3 billion when the second liquidation was made.

This amount would include capacity for the proposed investments in Irish infrastructure assets and water metering services as set out in the National Recovery Plan 2011-2014.

At the end of March, the fund’s discretionary portfolio invested 50 per cent in quoted equities, 21.4 per cent in financial assets and 28.6 per cent in alternatives including 9 per cent in private equity.

The directed portfolio consists of ordinary and preference shares in Allied Irish Banks and Bank of Ireland as well as cash realised in respect of the State’s contribution to the support program.

They represented 36 per cent and 49.9 per cent respectively of the ordinary share capital of Bank of Ireland and AIB.

The performance of the discretionary portfolio continues to outstrip that of the directed portfolio with returns of 11.1 per cent and -7.9 per cent respectively for 2010.