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NTMA targets diversification into alternatives for National Pension Reserve Fund for 2009 Back  
The National Treasury Management Agency (NTMA) shows a targeted increase in its allocation to alternatives through the National Pension Reserve Fund (NPRF) - increasing the total alternative assets of the fund from 6.4% as of December 2007 to 20 per cent end 2009 target in its report “Preliminary results for 2007”.

The table shows how the NTMA is planning to shift the national pension fund into alternatives, reducing its allocation to conventional large cap equities and bonds, and also cutting its cash allocation.

Frank O’Brien of Investment Faculty Ireland says of the NTMA’s strategy, ‘In strategic terms the evolution of the targeted position has involved a switch to a more balanced and more diverse asset mix.’

O’Brien says:’Alternative Assets, if Emerging Market Equities are included, already account for 14.5% of the Total Fund. Over the next three years, to the end 2009 target, a further substantial move out of Equities into Alternatives is planned.’

The description of the fund’s strategy states: ‘The fund’s long term investment horizon enables it to accept the volatility (of equities) in a trade off for the expected higher long-term return.’ In its equities investments - the fund is increasing its exposure to emerging markets and small cap equities - out of large cap equity. On alternatives the report states :’This long term perspective also means the Fund is well placed to benefit from the additional return and diversification benefits available from holding less liquid assets such as property and private equity.’

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