Paul Nicholas Gogarty
Question:92 Mr. Gogarty asked the Minister for Finance the ethical investment principles which underline the making of investments on behalf of the national pensions reserve fund. [14677/03]
Written Answers. - National Pensions Reserve Fund.
Eamon Ryan
Question:103 Mr. Eamon Ryan asked the Minister for Finance the current balance of moneys within the national pensions reserve fund. [14675/03]
Jan O'Sullivan
Question:107 Ms O'Sullivan asked the Minister for Finance if he will make a statement on the performance of the national pensions reserve fund; the extent of the losses incurred by the fund at the latest date for which figures are available; and if the Government intends to amend the legislation to allow the resources of the fund to be used to finance all or part of the 10,000 affordable houses agreed in the recent national agreement talks with the social partners. [14650/03]
I propose to answer Questions Nos. 92, 103 and 107 together. The national pensions reserve fund is managed by commissioners who are independent of Government. They control and manage the fund with discretionary authority to determine and implement an investment strategy for the fund. This investment strategy is based on a commercial investment mandate with the objective of securing the optimal return over the long-term, having regard to the purpose of the fund as set out in section 18(1) of the National Pensions Reserve Fund Act 2000, and the payment requirements of the fund as provided for under section 20 of the Act, provided the level of risk to the moneys held or invested is acceptable to the commission.
In determining the investment policy of the fund during the drafting of the National Pensions Reserve Fund Act, I gave consideration as to whether this policy should be strictly commercial or whether it should be qualified by ethical, environment and other public policy criteria. A major difficulty in deciding on an ethical investment policy is where to draw the line, given that there will inevitably be different opinions and intense debate on what constitutes ethical and socially responsible investments. In short, there is unlikely to be broad consensus on any ethical investment policy. Furthermore, the list of what might be considered unacceptable investments is likely to continually change in the light of developments in the political, social and scientific spheres.
Accordingly, the investment mandate included in the legislation is modelled on the standard commercial mandate for private pension funds, which is to maximise returns subject to prudent risk management. However, I would point out that the National Pensions Reserve Fund Act provides for the accountability of the commission to this House with regard to its investment strategy. The commission's annual report must be laid before each House of the Oireachtas and is required to include a detailed list of the fund's assets at year end. Furthermore, the chairperson of the commission is required to appear before the Committee of Public Accounts at that committee's request.
The assets of the fund were held in cash up to 31 December 2001 and the commission commenced entry into the markets in 2002. By end-December 2002 a total of €8,163 million had been paid into the NPRF since its inception in April 2001 by way of capital contributions from the Exchequer. A further capital contribution of €276 million was made in March 2003, bringing the total Exchequer contribution to €8,439 million. The provisional market value of the fund at end 2002 – the latest date for which figures have been published by the commission – was €7,426 million – a decline of €737 million. This decline is a net figure which takes account of investment income in both the temporary holding fund and the fund itself and also of gains in the bond portion of the fund offset by declines in the value of equities. The investment return since the fund's inception to end December 2002, measured according to industry standards, was -13.3% compared with a return for the fund's strategic benchmark of -24.4% and a return for the average Irish managed pension fund of -19.3 %.
Regarding the use of fund moneys for investment in affordable housing or for other infrastructure purposes, I do not intend to propose any change to the provisions of the National Pensions Reserve Fund Act 2000, in order to direct the commissioners to invest fund moneys in any particular way. There is, of course, nothing to prevent the commissioners from investing in housing or other infrastructural projects in Ireland should they be satisfied that such investments are likely to yield a commercial return.