DUBLIN - The newly appointed commissioners of Ireland's e6 billion ($5.45 billion) National Pensions Reserve Fund will start searching for money managers and other service providers within the next two months.
The commissioners, appointed last month by Finance Minister Charlie McCreevy, are expected to meet early this month and will decide whether to appoint external consultants and what the optimal asset mix should be for the fund.
The commissioners, who will act as trustees to the fund, are: Martin Kohlhaussen, chairman of the board of managing directors of Commerzbank AG, Frankfurt; Donal Geaney, chairman and chief executive officer of Elan Corp. PLC, Dublin, Ireland's largest listed company; Dan Tully, former chief executive and currently chairman emeritus of Merrill Lynch & Co. Inc., New York; Don Roth, managing partner at private equity firm Emerging Markets Partnership, Washington; Brid Horan, general manager of the e1.9 billion Electricity Supply Board pension fund, Dublin, and chair of the Irish Association of Pension Funds Investment Committee; Bob Curran, second secretary, public expenditure division, at the Irish Department of Finance; and Michael Somers, chief executive of the National Treasury Management Agency.
Tom Finlay, head of institutional business for Bank of Ireland Asset Management, welcomed the fact that the commissioners had a broad range of competencies and are a mix of people with international and domestic experience in investing.
"One would not want to see a parochial approach. The fund will be investing globally," said Anne Fitzgerald, head of the Irish Association of Pension Funds.
Mr. Finlay was not concerned that some of the commissioners with a background in money management might face a conflict of interests.
"I am sure these people are well capable of handling these issues," he said.
Questions of asset allocation, the use of different investment management styles, the fund's tracking error and the necessity for external investment consultants will be on the agenda for the commissioners' first meeting, said Deborah Reidy, the fund's recently appointed head of investment manager selection.
As the assets in the fund may not be drawn down until 2025, the asset mix is likely to be heavily weighted toward equities - as much as 70%, she said. Commissioners will make the ultimate decision, she noted.
Ms. Reidy said the commissioners also will decide whether to have an allocation to private equity. That the assets will not be needed until 2025 make it an almost ideal vehicle for private equity investing. But the Irish government is known to be keen to distance the fund from any socially and politically motivated investments such as public works projects.
Ms. Reidy said domestic money managers would not receive any preferential treatment.
"The idea is to pick the best money managers in the world. This will be a commercial decision. There is no desire to bias the asset allocation," she said.
(U.S,-born Ms. Reidy has been working in Ireland for the past six years and most recently was a partner at William M. Mercer Ltd., Dublin.)
A portion of the assets likely will be invested passively, said John Corrigan, head of Euro funding and debt management at the National Treasury Management Agency, which will administer the fund.
The fund will be barred from investing in Irish government debt, but as NTMA staff has some internal expertise in managing fixed income, it is likely they would be given some of the bond mandates to manage.
But the funding of mandates could take another year to 18 months. The fund's size means there will be considerable risk in market timing and the commissioners will need to decide whether to invest all the assets at once or gradually build up the portfolios, Mr. Corrigan said.
The fund initially was financed with the proceeds of the 1999 privatization of Eircom PLC, Dublin. But the Irish government is committed to donating 1% of gross domestic product to the plan every year until 2055, to create a reserve fund to cover the increase in state pension benefits as Ireland's population ages. Ireland is one of the first countries in Europe to set up such a pension reserve fund.