Fund to sell equities to realise €10bn


EQUITY SELL-OFF:THE NATIONAL Pension Reserve Fund will begin selling its equity investment holdings “over the coming months” to invest €10 billion in the banks, a spokesman has confirmed.

The announcement that a further €10 billion from the fund will be committed to the banks will leave the pension fund with “discretionary investments” of €4.2 billion out of holdings of almost €25 billion. As of the end of September 2010, the fund held cash assets of €4.1 billion, meaning some of its investments in listed securities, mainly equities, will have to be disposed of to invest in the banks.

Some €10.7 billion from the fund had already been either committed or earmarked for AIB and Bank of Ireland. In March 2009, the Government, through the fund, gave €3.5 billion from the fund to both AIB and Bank of Ireland in exchange for preference shares in each bank as it sought to recapitalise them. Another State investment of €3.7 billion from the fund was recently assigned to AIB but has not yet been drawn down.

A total of €20.7 billion from the fund, set up to pay for public and State pensions from 2025 onward, has been diverted into the banks instead, leaving just a fraction in its “discretionary” portfolio.

The Opposition has condemned the gutting of the fund, while Jerry Moriarty, policy director at the Irish Association of Pension Funds, said it was “a very retrograde step” for pension provision.

The National Pension Reserve Fund was established to prefund part of the State’s future pension bills because the proportion of workers to pensioners is projected to fall from five-to-one to two-to-one by the middle of the century.

The Government said at the weekend it did not make sense to pay more in interest on borrowings than it is earning on investments held at the fund.

The fund made a return of 6 per cent over the first nine months of 2010 due to strong equity markets, but its annualised performance average since its inception is lower at 3 per cent.

The National Pension Reserve Fund: an obituary, at blogs/theindex