State pension fund to invest in private Irish companies

The management of the €15 billion State pension fund plans to invest in private Irish companies through local venture capital firms this year, The Irish Times has learned.

As part of a new strategy that will see it put €2 billion into private companies around the world over the next three years, the National Pension Reserve Fund (NPRF) plans to put some of that cash into Irish companies.

According to NPRF director John Corrigan, its staff have already had talks with the major venture capital players in the Republic.

He said many of them intend to raise cash this year that will be invested in viable start-up and developing companies.

Mr Corrigan said it was too early to say how much money it will commit to Irish venture capital projects, as this would depend on the ultimate amount of funds they would require.

However, he stressed that the NPRF was committed to making the investment, and has already taken the initiative. "We got in touch with them off our own bat and asked them to come in and talk to us," he told The Irish Times.

"The National Pension Reserve Fund will have committed funds to them by the end of 2006," he added. "The Irish funds will be part of our private equity programme."

Mr Corrigan did not say with which of the venture capital firms the NPRF had been talking. However, it is understood that players like ACT Venture Capital, Trinity Venture Capital and Ion Equity will be raising funds over the coming 12 months.

The NPRF stood at €15.3 billion by the close of business last Friday. A strong rally in world equity markets delivered a 19 per cent return on its share portfolio during 2005, which was a record performance for the fund.

Former finance minister Charlie McCreevy established the fund to ensure that the State could meet the future pension liabilities it will owe to public servants and social welfare recipients. It will not start paying out until 2025.

Mr Corrigan said the fund had been diverting some of its cash from shares in global companies with large market capitalisations.

It plans to put €2 billion into private companies and €2 billion into property investment funds between this year and 2009. The fund, operated by the National Treasury Management Agency, embarked on this strategy in 2005.

Mr Corrigan said its private equity strategy to date has focused on large capital buyout firms.

It took part as a limited partner in the Clayton Dubilier & Rice-led purchase of the Hertz car hire company from the Ford Motor Corporation for $15 billion (€12.7 billion). The deal's other backers included the Carlyle Group and Merrill Lynch Global Private Equity.

Mr Corrigan expects that the firm will float Hertz in the medium term, which should hopefully deliver a pay-off for the fund and for Irish taxpayers.

Clayton Dubilier & Rice is one of the biggest private equity firms in the world. Its other investments include the Uniroyal tyre company.