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Total value of Irish Strategic Investment Fund rose almost 11% over first year

about 10 hours ago

Cliff Taylor, Ciara O’Brien

The value of the Irish Strategic Investment Fund rose almost 11% in 2015.




AIB and Bank of Ireland had repaid 31 per cent of the bailout funds that they received from the Ireland Strategic Investment Fund by the end of last year, according to figures published yesterday.

Isif’s fourth quarter performance and portfolio update shows that the two banks had returned €6.4 billion in receipts to the State agency, by the end of last year, of the €20.7 billion they received between 2009 and 2011 from the former National Pensions Reserve Fund, which Isif has replaced.

Bank of Ireland had repaid €4.2 billion of the €4.7 billion it received while AIB had paid €2.2 billion out of €16 billion it was given. The funds from AIB were received last year and related to €1.9 billion for the conversion of some of the State’s preference shares and a dividend payment on those shares.

Isif said the State’s holding in AIB was worth €11.7 billion at the end of 2015. This was the same figure as the previous year but the mix was different.

Preference shares

The 2014 valuation included the value of the preference shares – breaking down as €7.2 billion for the ordinary stock and the balance in preference shares.

A reorganisation of AIB’s capital last year has altered that mix. In addition to receiving a cheque from AIB the State also received 155 billion ordinary shares as part payment for the conversion of the preference stock. This resulted in its holding in the bank increasing marginally to 99.9 per cent.

AIB also consolidated the number of shares in issue, as a precursor to a potential flotation this year. Taking this consolidation into account, AIB’s shares were worth€3.43 each in 2014 with Isif valuing them at €4.33 at the end of last year, an increase of 26 per cent.

The Isif figures estimate that, in total, the remaining stakes in AIB and Bank of Ireland are worth €13.5 billion. This compares with €15 billion in the previous year when the AIB preference shares were still in issue.

The payment from AIB for the preference shares was remitted to the exchequer under direction by the Minister for Finance Michael Noonan and will be used to pay down the State’s national debt in due course.

The AIB holding is part of the €13.5 billion directed portfolio of investments made by Isif, which is under the direction of the minister and also includes public policy investments in Bank of Ireland (the State still owns close to 14 per cent of its shares) and Strategic Banking Corporation, which has received €240 million.

The portfolio generated a 15.3 per cent return on its investment over the year.

Discretionary portfolio

The fund also includes a discretionary portfolio that comprises equity investments, government bonds and has €7.9 billion at its disposal.

That generated a 1.5 per cent return since the fund’s investment on December 22nd 2014.

Overall, the value of the fund’s holdings rose almost 11 per cent in its first year since taking over from the National Pensions Reserve Fund.

Isif is also developing a connectivity fund that will work to enhance physical and virtual connectivity both within and for the State, with €335 million at its disposal.

Isif was set up as a successor to the National Pensions Reserve Fund in 2014, aimed at investing on a commercial basis to support economic activity and employment in the State. By December 2015, it had committed €2 billion to investments in Ireland, and was close to completing on six investments with a value of €200 million.