Low-risk investment strategy to be taken with two new government wealth funds

By the end of this year the two funds will have combined assets of over €10bn, and the NTMA says it will be ready to start investing in the autumn.

The Government has set up the Future Ireland Fund (FIF) and the Infrastructure, Climate and Nature Fund in order to squirrel away some of the windfall receipts of corporation tax that have been rolling into Exchequer coffers.

An initial €4.3bn will be put in the FIF, and €2bn into the climate fund, but another €4.1bn is going into the FIF before the end of the year.

“In the initial phase, the NTMA will implement a relatively low-risk investment strategy, pending the development of longer-term strategies for the funds,” chief executive Frank O’Connor said.

“As set out in the legislation, the funds will be invested on a commercial basis so as to seek optimal total financial return, having regard to the level of risk.”

A new business unit of the NTMA is being set up to manage the funds, and a director of the unit is to be hired. An investment committee will be set up to oversee the funds, and the number of NTMA board members is going up by two.

Mr O’Connor said the NTMA would take some time to appoint the new investment committee, and it might have an international dimension.

He added that international investors who lend to Ireland have reacted positively to the setting up of the two funds.

Speaking at the launch of the agency’s annual report for 2023, Mr O’Connor said the national debt fell by €4bn last year to €221bn, which is still €17bn above its pre-pandemic level.

Despite the high interest-rate environment internationally, the interest bill on the national debt last year was only slightly higher than in 2022, and will stay at about 1.5pc this year. This was attributed to the strategy of pre-funding at lower rates, and having one of the longest average maturities in Europe, at 10 years.

There will be few debt maturities in the next few years, which reduces the risk around having to refinance loans.

There were some positive movements in Ireland’s credit rating last year, with Moody’s moving to Aa3, S&P to AA, while last May the agency Fitch upgraded Ireland to an AA, the highest rating it has given us since 2009.

Speaking at the launch, the new Finance Minister, Jack Chambers, said the size of the national debt is expected to fall as a percentage of GNI.

He pointed out, however, that given the high level of debt, the Government needed to take a careful approach, and be responsible in the budgetary process.

“We are trying to steer a course that is prudent in fiscal terms, but that will also grow the economy,” he said.

Mr O’Connor said: “We are seeing continued stability in our debt-servicing costs, with our funding and debt management strategy successfully mitigating the risk posed by the higher interest rate environment.

“We expect our long-established strategy of pre-funding maturities, borrowing for long terms at low fixed rates, will keep these costs at or close to their current level for the next number of years.”