A group of about 40 credit unions struggling with excess funds have taken advantage of a relaxation of investment restrictions in 2018 to invest more than €150 million in a corporate bond fund put together by asset management giant Amundi and Goodbody Stockbrokers.
The fund, which is invested in more than 50 companies, is the first of its kind to get off the ground in the Republic since the Central Bank moved in 2018 to allow credit unions to invest in a corporate bond fund that had a minimum of €150 million at launch.
Goodbody had been working with credit unions since last September on the initiative.
"This is an ideal time for credit unions in Ireland to review their investment opportunities as negative interest rates have become widespread across the Irish market and, we expect, interest rates in Europe will remain very low for an extended period," said Gerard Moore, a senior director at Goodbody. "To counter this, we believe that credit unions need to look beyond traditional bank deposits and bank bonds and this new asset class will allow them to achieve this."
The fund is open to further investment from credit unions.
Irish credit unions had just €27 out on loan for every €100 of assets at the end of September, according to a Central Bank report on the sector that was issued late last year. A surge in household savings during Covid-19 saw Irish credit union deposits rise 7 per cent to €16.3 billion in the year to September, adding to the challenges of many firms in the sector remaining in business as loan demand remains muted.
Up until the 2018 rule changes, credit unions could only invest in a limited range of investment options including bank deposits, government bonds and bank bonds. Corporate bonds in a fund must carry investment-grade ratings across debt ratings agencies, meaning that they must be rated between AAA and BBB-.
Leading asset manager
Amundi, which is the investment manager of the fund, is Europe’s leading asset manager with more than €1.7 trillion of clients’ assets. Amundi Ireland, with 350 professionals, is one of the group’s key investment centres.
Graham Fox, head of retail distribution at Amundi Ireland, said: "This collaboration with Goodbody demonstrates our ability to create bespoke funds for clients from our investment hub in Dublin. This fund will also be managed from Dublin by one of our fixed income portfolio managers, Sarah Donnelly. "