Strong returns from Isif except for State’s shares in bailed-out banks

The headline performance figures for last year published this week by the Ireland Strategic Investment Fund (Isif), the successor to the National Pensions Reserve Fund (NPRF), were impressive.

Isif’s so-called discretionary investment portfolio generated a 6.2 per cent, or €500 million, return last year, driving the size of the fund to €8.6 billion. Not bad in the midst of a global pandemic.

That’s twice the average annual rate Isif has delivered since it was set up in 2014. And it also compares well with a number of stock indices in a volatile year for investments, which saw the pan-European Stoxx 600 index drop 4 per cent, the Iseq advance 2.7 per cent, the FTSE 100 slide 14 per cent and Wall Street’s S&P 500 rise 16 per cent.

The big driver of Isif fund’s performance was money committed to international venture-capital and private-equity managers, even though this accounts for less than a fifth of the total portfolio, the organisation said on Monday.

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Recovery funds

The update also gave an overview of the €430 million of Covid-19 recovery funds handed out to companies, including airport operator DAA, non-bank lender Finance Ireland and Aer Lingus under one of the Government's crisis initiatives launched last year.

But it conveniently omitted any reference to a sizable part of its investment pot: or what’s referred to as its “directed investments” in banks. These were the gun-to-the-head bank investments that the NPRF was ordered by the then government to make during the financial crisis post-2008. No one in the fund would have bought shares in the banks at the time off their own bat.

Responding the questions from Cantillon, a spokesman for Isif confirmed that the overall value of the "directed portfolio" slid to €3.9 billion from €6.9 billion over the course of 2020, driven by an almost halving of the market value of its 71 per cent stake in AIB, to €3.2 billion.

You can see why Isif would want to distinguish between the investments that it has a say in making and the bank bailout holdings. Nonetheless, they cannot be ignored.