The investment managers who will oversee the new multibillion-pound National Pension Reserve Fund will not be required to invest in the Republic specifically.
The investment of the #6 billion plus fund will be primarily in shares in other euro zone countries with a large chunk being invested in the US. Small amounts will be directed to Japan and the Far East.
The National Treasury Management Agency, headed by Dr Michael Somers, which is managing the fund, has set out how it will be invested. Fund managers have been asked to tender for the investments which amount to more than #4.7 billion.
The pension fund, which will be used to meet the costs of public service and social security pensions after 2025, will be closely tied to the fortunes of the euro zone. It is unclear why the NTMA came to this decision but questions are likely to be asked about the fund's investment priorities.
Hundreds of fund managers from all over the world are likely to apply to manage the funds and it is not guaranteed that any Irish firms will win any of the business.
The sizes of some of the tranches are already large and, with a guaranteed 1 per cent of GNP to be invested every year, are set to become much larger.
Around #2.4 billion has been earmarked for investment in Europe with almost #1.3 billion in the US and around #300 million in Japan. There is also a small amount to be invested in the Pacific Basin and other areas.
It is not clear where the rest of the monies will be held, although some may be managed by the NTMA in bond holdings and some may be held as cash. Markets are currently volatile and this may not be the best time to invest all the monies.
In recent years fund managers have been selling large holdings of Irish shares in an effort to diversify holdings. They argue that their portfolios are already exposed to the Irish economy and it makes sense to diversify into other areas.
The new fund will be dominated by so-called passive or index-style investing. This involves buying only small amounts of stocks on the derivative markets and then mirroring the exact movements of an index.
Active investing, on the other hand, involves the fund manager attempting to beat the index through sound, stock choices and is thus a riskier strategy.
The largest mandate which managers are being asked to tender for is a #2 billion passive fund to be invested in the euro zone.
There is also a #350 million passive fund to invest in the US as well as three #30 million euro zone active funds and two global active portfolios at #350 million each. These are to be 50 per cent exposed to the euro zone and 50 per cent to the rest of the world. In contrast, the FT World Index is made up of about 50 per cent US, 30 per cent in the euro zone and 20 per cent the rest of the world.
