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NPRF shuns hedge funds due to ‘lack of regulation’ Back  
Last August the €11.7 billion National Pensions Reserve Fund (NPRF) declared its desire to invest in hedge funds. However, it has now shunned these funds due to ‘the rapid growth in the asset class which could crowd out successful strategies, the difficulties in identifying consistent top quartile managers and the lack of regulation of the sector.’
Pictured at the launch of its annual report are (l-r): Michael J. Somers, CEO National Treasury Management Agency and Donal Geaney, chairman of the National Pension Reserve Fund.
Instead, as reported in its annual report, it will allocate 18 per cent of its fund to property, private equity and commodities over the next five years. €940 million will be invested in private equity, €940 million in property and a further €230 million in commodities.

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The NPRF has announced that it will invest 18 per cent of its portfolio in alternatives - but not hedge funds. Pictured at the launch of its annual report are (l-r): Michael J. Somers, CEO National Treasury Management Agency and Donal Geaney, chairman of the NPRF.

This change in strategy means the overall allocation of the fund to equities has been reduced from 80 per cent, when the fund was launched to provide partial funding of Ireland’s pension costs from 2025, in 2001, to 69 per cent. The allocation to bonds has been cut from 20 per cent to 13 per cent.

Speaking to FINANCE in August 2004, Ronan O’Connor, head of asset allocation with the NPRF, said that hedge funds were next on the agenda, but in the fund’s annual report, just issued, the NPRF said it will not consider hedge funds for the moment, and instead reiterated its intention to diversify its portfolio of investments to include property, commodities and public private partnerships (PPPs).
However, according to the report, ‘in the longer-term and with developments in these areas of concern, the NPRF Commission will examine the asset class again’.

The decision goes against a strengthening international trend. Globally, pension funds have increasingly turned to hedge funds to provide them with higher returns. Britain’s largest pension fund, British Telecom, recently allocated ?500 million to hedge funds over the next two to three years. In Ireland, however, the
NPRF’s decision is in line with other pension funds. According to a representative from Mercer Ireland, only two of its pension fund clients have allocated to hedge funds, and this allocation was in the region of five per cent. An employee of Watson Wyatt told FINANCE that none of its clients have invested in hedge funds, and didn’t expect any in the short-term.

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