October 9, 2018 / 6:22 PM / 9 months ago

Ireland to reallocate 3 billion euros of sovereign wealth fund

DUBLIN, Oct 9 (Reuters) - Ireland’s finance department recommended the reallocation on Tuesday of 3 billion euros of the country’s 8.5 billion euro sovereign wealth fund away from its initial broad investment strategy to government priority areas.

The Ireland Strategic Investment Fund (ISIF) was established in 2014 from the cash left in the country’s pension reserve fund following the financial crash to invest on a commercial basis in supporting economic activity and employment in Ireland.

The government said in July it would refocus the fund to meet the needs of an economy that had since grown rapidly.

In a review published on Tuesday, the finance department said the reallocation of ISIF’s excess capacity would allow government to set up a ‘rainy day fund’ and ease infrastructure constraints.

Dublin had previously announced that the rainy day fund - a new contingency reserve - would be initiated with 1.5 billion euros from ISIF but the the finance department detailed on Tuesday how the other 1.5 billion could be put into a dedicated side-portfolio to target strategic infrastructure projects.

This side-portfolio would allow ISIF to undertake a higher level of risk as it would not need to be diversified like the remainder of its portfolio and could fund investments that would not impact the government’s budgetary position, the review said.

The specific strategic infrastructure sectors should be determined by government as part of the budgetary process, it added.

ISIF had identified the potential reallocation of up to 2 billion euros of its resources, the review said.

The finance department identified the higher figure taking account of dividends paid to the fund by majority state-owned Allied Irish Banks and funding for the state’s water utility which will be replaced with sovereign debt funding. (Reporting by Padraic Halpin Editing by Gareth Jones)

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