The Ireland Strategic Investment Fund (ISIF), managed and controlled by the National Treasury Management Agency (NTMA) is an €8.0 billion sovereign development fund with a unique mandate. The Fund’s predecessor was the National Pensions Reserve Fund (NPRF).
The conversion from the National Pensions Reserve Fund (NPRF) into the Ireland Strategic Investment Fund (ISIF) was legislated for by the NTMA (Amendment) Act, 2014 which was enacted on 28 July 2014. The subsequent commencement order issued by the Minister for Finance gave effect to the Fund from 22 December 2014.
The assets of the NPRF became assets of the ISIF on the ISIF’s establishment. The transition of the NPRF from a globally diversified fund to the Ireland Strategic Investment Fund, a new fund with a mandate to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland, began in 2014.
The NPRF was established in 2001 under the National Pensions Reserve Fund Act, 2000 to supplement the existing “pay as you go” public pension system and was controlled and managed by the National Pensions Reserve Fund Commission, acting through the NTMA as manager of the Fund.
The NPRF had a long term investment horizon given its statutory objective to meet as much as possible of the costs of social welfare and public service pensions from 2025 until at least 2055. The Exchequer contributed an amount equal to 1% of GNP annually into the NPRF. The investment mandate required the Fund to secure the optimal total financial return provided the level of risk was acceptable to the Commission. The Commission implemented its investment strategy through a globally diversified portfolio that included quoted equities, bonds, property, private equity, commodities and absolute return funds.
In 2009 the Minister for Finance decided to utilise some of the assets of the NPRF to assist in dealing with the financial crisis facing Ireland and the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Act, 2009 (“2009 Act”) was enacted. In 2009 and 2010 the Minister for Finance, pursuant to the 2009 Act, directed the NPRF to invest a total of €10.7 billion in AIB and Bank of Ireland. In late November 2010, the Government announced that the NPRF would further provide up to €10 billion of the State’s €17.5 billion contribution to the €85 billion EU/IMF Programme of Financial Support for Ireland. The Credit Institutions Stabilisation Act, 2010 was enacted in December 2010 and significantly amended the legislation governing the NPRF. The Minister for Finance subsequently suspended the Exchequer contribution to the NPRF until the end of 2013.
Following the first Ministerial Direction to invest in AIB and Bank of Ireland and given that the Commission’s statutory investment policy did not apply to the directed banking investments, the Commission decided to separate the NPRF into two parts for management purposes – the Discretionary Portfolio (the investment of which remained the Commission’s responsibility) and the Directed Portfolio (where the investments were made at the direction of the Minister for Finance).
The NPRF has invested a total of €20.7 billion in AIB and Bank of Ireland at the direction of the Minister for Finance – the original €10.7 billion and a further €10 billion in 2011. The Commission continued to manage the remainder of the assets, the Discretionary Portfolio, in line with its statutory investment policy. The total NPRF was valued at €22.1 billion upon the ending of its mandate on 22 December 2014, comprising the Discretionary Portfolio of €7.1 billion and Directed Portfolio of €15.0 billion.
In September 2011 the Government announced its intention to establish a Strategic Investment Fund initiative to channel resources from the NPRF, following appropriate changes to governing legislation, towards investment in sectors of strategic significance to the future of the Irish economy. These legislative changes were made in the NTMA Act, which formally established the ISIF with a mandate to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland.
On 22 December 2014 all assets governed by Irish law transferred automatically from the Commission to the NTMA (becoming assets of the ISIF) and the NPRF’s investment mandate ended. The NTMA Act, which was enacted on 28 July 2014, reduced the members of the Commission to a single commissioner, being the Chief Executive of the NTMA. The ISIF will also include the NPRF’s Directed Portfolio, which will remain under the direction of the Minster for Finance. The dual objective mandate of the fund – investment return and economic impact – represents a new approach to investing and will require all investments to generate investment returns and have an economic impact in Ireland.