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Ireland Strategic Investment Fund (ISIF)

PRI reporting framework 2019

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Basic information

OO 01. Signatory category and services

01.1. Select the type that best describes your organisation or the services you provide.

01.3. Additional information. [Optional]

Fund Background

In December 2014, the assets of the National Pensions Reserve Fund (NPRF), mainly liquid global assets, transferred to the Ireland Strategic Investment Fund (ISIF). The ISIF has a unique "double bottom line" mandate to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland, and invests mainly in Irish assets in private markets. The NPRF Discretionary Portfolio was made available to the ISIF to enable it to make investments that meet this mandate. The global assets are transitioned over a multi-year period to provide liquidity for Irish investment opportunities as they are identified and executed.

The Directed Portfolio (primarily public policy investments in AIB and Bank of Ireland made during the financial crisis in 2009-2011) continues to be managed within the ISIF under direction from the Minister for Finance.

The ISIF's double bottom line mandate makes it one of the few sovereign wealth funds globally with a mandate to contribute to economic activity and employment, in addition to delivering commercial returns. The ISIF is required to seek to generate a return over the long term in excess of the cost of Irish Government debt.

In seeking to contribute to economic activity and employment, the ISIF's investment focus is on additionality, or investments which build the productive capacity of the Irish economy. The ISIF's unique characteristics - scale, flexibility across the capital structure and long-term investment horizon - mean that it can target such investments in a way that many other investors and financiers cannot. Conversely, the ISIF in its Investment Strategy seeks to avoid deadweight (crowding out willing private sector investment) and displacement (enterprises whose success comes at the expense of others within the Irish economy).

At end-2018, the value of the ISIF Discretionary Portfolio was €8.8bn, comprising global assets of €6.2bn and Irish assets of €2.6bn, and the value of the Directed Portfolio was €11.8bn.

As at year end 2018, the Discretionary Portfolio accounted for 52 % of the value of the Fund.

The Fund's Sustainability and Responsible Investment Strategy (SRIS) applies only to the Discretionary Fund and ISIF's PRI reporting reflects this throughout.

2015 Investment Strategy (ISIF 1.0)

In May 2015, the NTMA Board approved the 2015 ISIF Investment Strategy, following consultation with the Minister for Finance and the Minister for Public Expenditure and Reform. The key features of the 2015 Investment Strategy included;

A broad-based Portfolio; across sectors, regions and asset classes

ISIF's Key Differentiators; Utilisation of the ISIF's key differentiating features of scale, flexibility across the capital structure, long-term investment horizon and credibility as a sovereign investment partner to provide something additional or unique in the market and enable transactions which would not otherwise easily be completed.
 Co-investment; Attracting co-investment partners where possible so that the impact of ISIF investments will be multiplied in the Irish economy.
 Return; Risk-adjusted rates of return appropriate to the specific characteristics of each individual investment. Overall long-term portfolio return in excess of the average cost of Government debt.

2019 Investment Strategy (ISIF 2.0)

ISIF's 2025 ambition is to exceed the investment return benchmark and make sustainable progress under the Priority Themes.

The key features of the 2015 Investment Strategy are broadly unchanged under ISIF 2.0, specifically ISIF's key differentiators, the focus on co-investment and return (both commercial and economic impact return). ISIF's revised 2019 Investment Strategy, guided by the objectives of Project Ireland 2040, will target a €3 billion 5-year investment programme which will focus on five Priority Themes of key importance to the Irish economy: Regional development, Housing, Indigenous businesses, Climate change and Brexit. In addition, the Fund will continue to pursue investment opportunities that are suitable for its Connectivity Fund sub-portfolio, which includes existing investments in airport and port infrastructure and projects that enhance Ireland's global data and IT connectivity. The Fund will also maintain flexibility to selectively take advantage of compelling opportunities which are consistent with the Fund's mandate and do not fit under the priority themes.

Sustainability and Responsible Investment for a new mandate

The transition from the NPRF to ISIF involved the development and implementation of a new investment process for Irish investment together with the complex restructuring of the Fund's Global portfolio, which now has a shorter time-horizon

ISIF must invest on commercial basis in a manner that supports economic activity and employment in the State. As Ireland is a small economy, investment opportunities tend to arise in less liquid domestic private markets, and consequently the Fund has to take a long-term outlook of the risks as well the opportunities and ultimately the sustainability of a business or the sectors within which it operates. This makes the ISIF naturally very aligned with the broader principles of Responsible Investment and Sustainability. However, the challenge is to implement RI/ESG in a broadly consistent manner across two very different portfolios (shorter- term Global portfolio and longer-term Irish portfolio) as the Fund progresses through this transitionary stage from a well-established Sovereign Wealth Fund to a Strategic Development Fund.

Each year, the PRI reporting is quite different to previous years responses as they Fund evolves. For the purposes of this report assets as at year end 2018 are reported, but additional descriptive information is provided throughout as appropriate. Some Irish investments are being included for the first time.

The three key S&RI issues for the Fund over 2018 were the implementation of an ESG Framework for all Irish investments, development of Carbon measurement tools for Irish investments and the Fossil Fuel Divestment Act, 2018, a legislative requirement prohibiting investment in companys that generate >20% revenue from extraction, exploration or refinement of Fossil Fuels.

Further information on the Fund, its mandate and investments to-date are available on the Fund's website: www.isif.ie


OO 02. Headquarters and operational countries

02.1. Select the location of your organisation’s headquarters.

Ireland

02.2. Indicate the number of countries in which you have offices (including your headquarters).

02.3. Indicate the approximate number of staff in your organisation in full-time equivalents (FTE).

40 FTE

02.4. Additional information. [Optional]

Staff:  40 ISIF direct investment team staff as at end Dec 2018, plus c. 35 FTEs across other business units (Finance, HR, IT, Legal etc)


OO 03. Subsidiaries that are separate PRI signatories

03.1. Indicate whether you have subsidiaries within your organisation that are also PRI signatories in their own right.

03.3. Additional information. [Optional]


OO 04. Reporting year and AUM

04.1. Indicate the year end date for your reporting year.

31/12/2018

04.2. Indicate your total AUM at the end of your reporting year.

Include the AUM of subsidiaries, but exclude advisory/execution only assets, and exclude the assets of your PRI signatory subsidiaries that you have chosen not to report on in OO 03.2
Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

04.5. Additional information. [Optional]

ISIF Assets and Mandate

On commencement the ISIF absorbed the NPRF’s global portfolio and its directed investments. The total Fund size at the transition date (21 December 2014) was €20.5 billion with €13.4 billion in Directed Investments and €7.1 billion in the Discretionary Portfolio.

The value of the Discretionary Portfolio as at 31.12.2018 is €8.8 billion. These are the assets for PRI reporting.

The dual objective mandate of the ISIF – investment return and economic impact – represents a new approach to investing for the Fund and will require all investments to generate both investment returns and economic impact in Ireland, thereby re-configuring the ISIF from a sovereign wealth fund into a sovereign development fund.

Past Fund History (from NPRF to ISIF)

The National Pensions Reserve Fund of Ireland was established in April 2001 "for the purpose of meeting as much as possible of the cost to the Exchequer of social welfare pensions and public service pensions to be paid from the year 2025 until the year 2055“, as set out in the National Pensions Reserve Fund Act, 2000.

The Fund’s legislative remit was extended in 2009 and 2010 to allow the Minister for Finance to direct the NPRF Commission to invest in credit institutions in certain circumstances and in Government and Government-guaranteed securities and to make payments to the Exchequer to fund capital expenditure in the years 2011 to 2013. As a result of these changes the Fund now comprises two separate Portfolios: 1. Discretionary Portfolio 2. Directed Portfolio (public policy investments in AIB and Bank of Ireland) These "Directed Investments" are monitored, managed and reported on separately from the main "Discretionary Portfolio".

In June 2013 the Government announced its legislative proposals to establish the Ireland Strategic Investment Fund (ISIF) on a statutory basis and stated that its mandate would be to invest on a commercial basis to support economic activity and employment in Ireland. The NTMA (Amendment) Bill was published on 15 May 2014 and subsequently enacted on 28 July 2014. The  commencement of the Act (22 Dec 2014) involved the dissolution of the National Pensions Reserve Fund Commission, with oversight and management of ISIF passing over to a new overarching NTMA Board (“the Agency”) and its Investment Committee.

 


OO 06. How would you like to disclose your asset class mix

06.1. Select how you would like to disclose your asset class mix.

Internally managed (%)
Externally managed (%)

 

Listed equity <10% 2 10-50% 15
Fixed income <10% 6 10-50% 36
Private equity <10% 3 <10% 9
Property 0 0 <10% 6
Infrastructure <10% 1.2 <10% 3.1
Commodities 0 0 0 0
Hedge funds 0 0 10-50% 15
Fund of hedge funds 0 0 0 0
Forestry 0 0 <10% 0.6
Farmland 0 0 0 0
Inclusive finance 0 0 0 0
Cash 0 0 <10% 3.1
Money market instruments 0 0 0 0
Other (1), specify 0 0 0 0
Other (2), specify 0 0 0 0

06.2. Publish asset class mix as per attached image [Optional].

06.3. Indicate whether your organisation has any off-balance sheet assets [Optional].

06.5. Indicate whether your organisation uses fiduciary managers.

06.6. Provide contextual information on your AUM asset class split. [Optional]


OO 07. Fixed income AUM breakdown (Private)


OO 08. Segregated mandates or pooled funds (Private)


OO 09. Breakdown of AUM by market

09.1. Indicate the breakdown of your organisation’s AUM by market.

98 Developed Markets
02 Emerging Markets
0 Frontier Markets
0 Other Markets
Total 100% 100%

09.2. Additional information. [Optional]


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