Irish sovereign fund gains 2.9% but bank stakes decline

Ireland’s sovereign wealth fund incurred a €1.1bn loss in 2016 on its holdings in two bailed-out banks, according to its annual report.

The Ireland Strategic Investment Fund (ISIF) posted a 2.9% investment return for 2016 from its discretionary portfolio, but the value of its stakes in Allied Irish Banks (AIB) and Bank of Ireland declined significantly during the year.

The ISIF owned 99.9% of AIB’s equity at the end of 2016, a legacy from the bank’s €20.8bn bailout from the Irish government in 2010. The ISIF also owned 13.9% of Bank of Ireland.

The stakes are held in a separate “directed portfolio”, along with loans and provisions set aside for the Strategic Banking Corporation of Ireland, and managed on behalf of the Irish Department of Finance. The portfolio was valued at €12.9bn at the end of the year, compared to €14bn 12 months earlier.

The Department of Finance sold a quarter of the AIB stake last month, raising approximately €3bn in the process.

In its separate discretionary portfolio, the ISIF invested €522m in new projects across Ireland during the year, bringing its total capital deployed domestically to €2.6bn. The ISIF has a long-term aim to transition its entire €8.1bn portfolio to domestic investments.

Combined with co-investment partners, the ISIF said it had helped raise €7.5bn for Irish companies and projects since its inception in 2014.

In its annual report, the ISIF said: “While the macroeconomic environment in Ireland has improved significantly in recent years and the availability of private capital has increased greatly, there are still material gaps in the market provision of finance to sectors and companies and there remains a wide variety of investment opportunities where ISIF capital, in conjunction with private sector partners, can fill gaps and make a real difference to economic activity.”

The fund said it had a pipeline of 60 potential new investments at the start of 2017: in January it contributed to a fundraising for sales platform InsideSales, and in February it invested in an Irish forestry fund alongside the European Investment Bank.