The current design of ISIF’s Global Portfolio is the most effective way to meet its requirement to ensure that capital is available as investment opportunities in Ireland are executed and drawn down, while making a significant contribution towards ISIF’s investment return objective.
ISIF’s legislative mandate – to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland – requires it to transition, over a period of years, from a largely global portfolio into an Irish portfolio. Immediately converting the Global Portfolio into cash is not a preferred option, as interest rates on cash are negative.
Therefore, the overall objective of ISIF’s Global Portfolio is to preserve capital by limiting downside valuation exposure and ensuring that capital is available for investment in Ireland as required over the transition period, while also making a positive contribution towards ISIF’s investment return objective. This requires ISIF, through its investment managers, who are procured on a competitive basis, to implement a dynamic, diversified, highly liquid, low-risk global portfolio that includes a mix of asset classes including cash, debt instruments, equities, property and alternative investments such as absolute return funds. ISIF’s absolute return strategies, by design, have (i) low correlation to global markets, thereby delivering diversification benefits, and (ii) much lower volatility than equity markets.
As part of the wider Global Portfolio strategy, absolute return strategies comprise €1.8bn (27%) of the Global Portfolio as at end September 2018. ISIF publicly discloses the investment performance of its Discretionary Portfolio and of the Global and Irish sub-portfolios. Performance numbers for 2018 will be published in early February 2019.