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Pension Reserve Fund


pjoz

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Aug 25, 2009
Messages
473
Since very few FFers have attempted to explain National Competitiveness for me Im hoping ye might have more insight on this.

Fund Performance
Year To Date
1 January to 30 September 2009
Discretionary Portfolio 16.4%
Directed Investments 0%

Now on competitiveness those who attempted to explain the concept spoke in terms of selling things for more than they cost and producing them for less than others. Basically operating in much the same way as a corporation.
Given that the priority of a corporation is maximise shareholder wealth could somebody explain how investing such significant resources in a non performing asset could be tolerated.
I would ask only FFers respond as this is their private piggy bank
 


pjoz

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Aug 25, 2009
Messages
473
I suppose I should add some background detail as the majority of FFers Ive come across appear to be "economically illiterate"

The National Pensions Reserve Fund was established in April 2001 to meet as much as possible of the costs of Ireland's social welfare and public service pensions from 2025 onwards when these costs are projected to increase dramatically due to the ageing of the population. No money can be drawn down before 2025 and, from then on, drawdowns will continue until at least 2055 under rules to be made by the Minister for Finance. By spreading the Exchequer burden arising from Ireland's additional pension commitments over a lengthy period, these drawdowns will contribute to the long-term sustainability of the pension system.

The Fund is controlled and managed by the National Pensions Reserve Fund Commission. The Commission's functions include the determination and implementation of the Fund's investment strategy in accordance with its statutory investment policy. This policy requires that the Fund be invested so as to secure the optimal total financial return provided the level of risk is acceptable to the Commission.
 

Sync

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Aug 27, 2009
Messages
28,765
I don't disagree that the purchases were risky (and probably inappropriate for a pension fund to get involved in), but if you're an investment manager looking over the term of 25 years, if (and given the current situation that's a really big if) the banks remain on the market, there's little doubt they'll be worth more in 2017 for instance than they are now.

Agree it's risky, it's not something I'd have done, but it's in line with the legislation's rules.

I'm not an FFer, this isn't an "FF piggybank" and the topic would have been better off in Economy unless you're just trolling party sites.
 

pjoz

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Aug 25, 2009
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473
I dont know any investment manager who would pull a third of their funds out in the middle of a bull market and invest in such an asset.

In my opinion FF turned into a piggy bank to bail out the banks,something not envisaged in the "legislation" and its not a troll of party sites, its an economic issue granted, but FF are responsible for the economic well being of the state and for that reason I directed it at them.
 

Sync

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No, it's trolling. Will you be posting the same thing in an FG thread if/when they win the next election because then it will be "FG's piggy bank"? Don't be silly.
 

pjoz

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Aug 25, 2009
Messages
473
Did FG set it up and change the rules of the game as it suited them? It does raise an interesting question as to what FG intentions are towards it?
 

Sync

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Aug 27, 2009
Messages
28,765
Did FG set it up and change the rules of the game as it suited them? It does raise an interesting question as to what FG intentions are towards it?
Maybe you should start a thread in every party's site and ask them.
 

pjoz

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Joined
Aug 25, 2009
Messages
473
Maybe.Im getting from you FF dont do economic discussion?
 

Supermanpolitician

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May 8, 2007
Messages
1,033
No, it's trolling. Will you be posting the same thing in an FG thread if/when they win the next election because then it will be "FG's piggy bank"? Don't be silly.
Have to agree. It is trolling. It is very hard to decipher the opening post.
 

pjoz

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473
Have to agree. It is trolling. It is very hard to decipher the opening post.
It is an economic question posed to FF members. If it is more appropriate in the economy forum I have no problem in it being moved.

FF took the decision to divert these funds from an investment strategy that yielded 16.4% returns over the period to a strategy that yielded 0% returns.

Pointing this out and asking for an explaination from FF in my opinion isnt trolling.
 

GDPR

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Jul 5, 2008
Messages
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Since very few FFers have attempted to explain National Competitiveness for me Im hoping ye might have more insight on this.

Fund Performance
Year To Date
1 January to 30 September 2009
Discretionary Portfolio 16.4%
Directed Investments 0%

Now on competitiveness those who attempted to explain the concept spoke in terms of selling things for more than they cost and producing them for less than others. Basically operating in much the same way as a corporation.
Given that the priority of a corporation is maximise shareholder wealth could somebody explain how investing such significant resources in a non performing asset could be tolerated.
I would ask only FFers respond as this is their private piggy bank
As the money had to be put into the banks, where else could it have come from?


A few other points worth mentioning,

1. A FF Government set up the NPF.

2. It's a piggy bank that on other country in the EU has.

3. If FG/Lab had their way it's a piggy bank we wouldn't have now as they proposed to spend it some years ago.

So in a sense, you're right, it is FF's piggy bank, set up for the good of the state.
 

pjoz

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Aug 25, 2009
Messages
473
As the money had to be put into the banks, where else could it have come from?

If one was to accept that what ideology would we now be following?

I would give FF credit for its establishment but not in its implementation.

It shouldtn have bee used in such a manner and the significant opportunity costs involved should be addressed.

The resources diverted to the banks should have been accumulating at a rate of 16.4% over the period Jan - Sept 09, instead they yielded a 0% return and there is a significant risk they never will earn a return.
 

GDPR

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It shouldtn have bee used in such a manner and the significant opportunity costs involved should be addressed.

The resources diverted to the banks should have been accumulating at a rate of 16.4% over the period Jan - Sept 09, instead they yielded a 0% return and there is a significant risk they never will earn a return.
When did they know they would get a return of 16.4% over the period?
 

pjoz

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Aug 25, 2009
Messages
473
Its a matter of judgement.In the middle of a bull run they decided on this course of action. With hindsight you analyse decisions and on this one FF judgement was misplaced putting it kindly.

The amount invested in the banks could have brought the banks into public ownership.FF point blankly refused even though on the balance of probabilities it is still a very strong possibility.

This strategy has had a significant opportunity cost that will compound annually and this should be highlighted.
 

DCon

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May 5, 2009
Messages
5,901
f

FF took the decision to divert these funds from an investment strategy that yielded 16.4% returns over the period to a strategy that yielded 0% returns.
Maybe Lenny should deduct the lost interest from the 3.2BN we "saved" as a result of his tough decisions.
 

GDPR

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Its a matter of judgement.In the middle of a bull run they decided on this course of action. With hindsight you analyse decisions and on this one FF judgement was misplaced putting it kindly.

The amount invested in the banks could have brought the banks into public ownership.FF point blankly refused even though on the balance of probabilities it is still a very strong possibility.

This strategy has had a significant opportunity cost that will compound annually and this should be highlighted.
In the previous period they had lost about 20% on investments. We would have had to pay 5%+ if we borrowed the money + adding to the national debt.
It is a matter of judgement as to whether to nationalise the banks would be in our interest and it's the Governments view that it would not be in our interest to do that and in my view they are spot on the money there.

There is no opportunity cost here, the Government took the right course of action, anything else was a gamble.Trying to make a case using after the fact market results is ridiculous, even for this site.
 

pjoz

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Aug 25, 2009
Messages
473
In comparison the GPFG of Norway switched the focus of their fund into equity, up to 60%.This from a fund who traditionally invested heavily in low risk fixed income securities.

Norway due to this judgement call reaped huge benefits.FF judgement call cost the citizens of Ireland.

There is an opportunity cost in every decision regarding the allocation of economic resources.

That is a fundamantal economic fact.The mistake of FF in this regard is going to have very a significant compounding cost for years to come.
 

GDPR

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Messages
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In comparison the GPFG of Norway switched the focus of their fund into equity, up to 60%.This from a fund who traditionally invested heavily in low risk fixed income securities.

Norway due to this judgement call reaped huge benefits.FF judgement call cost the citizens of Ireland.

There is an opportunity cost in every decision regarding the allocation of economic resources.

That is a fundamantal economic fact.The mistake of FF in this regard is going to have very a significant compounding cost for years to come.
This was not a mistake, this was the right thing to do in the circumstances and I would think anyone who can even spell economics would understand that.

Be thankful that someone had the foresight to set up the fund in the first place.
 

pjoz

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Joined
Aug 25, 2009
Messages
473
By your own very logic it should all have been used by this stage to stave off increasing the national debt.

Setting up the fund was something I would have commended FF on, how they have used it to prop up the banks is unacceptable. That was never its remit. If the rules can be broken for the banks why not break them and provide stimulus to the economy in the form of capital infrastructure programs. There’s still 20 billion in the piggy bank.

In Jan 2009 prior to recapitalisation AIB Market Cap 1.074 billion, BOI .652 billion.
FF in their wisdom decided 7 billion was only worthy of warrants on 25% stake. These figures simply do not add up.

The National Pensions Reserve Fund Discretionary Investment Portfolio earned a return of 20.9 per cent in 2009.

Including the bank preference shares and related warrants, which are held at cost and zero respectively, the Fund recorded a return of 11.6 per cent in 2009.

FF need to be held accountable.
 

GDPR

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By your own very logic it should all have been used by this stage to stave off increasing the national debt.

Setting up the fund was something I would have commended FF on, how they have used it to prop up the banks is unacceptable. That was never its remit. If the rules can be broken for the banks why not break them and provide stimulus to the economy in the form of capital infrastructure programs. There’s still 20 billion in the piggy bank.

In Jan 2009 prior to recapitalisation AIB Market Cap 1.074 billion, BOI .652 billion.
FF in their wisdom decided 7 billion was only worthy of warrants on 25% stake. These figures simply do not add up.

The National Pensions Reserve Fund Discretionary Investment Portfolio earned a return of 20.9 per cent in 2009.

Including the bank preference shares and related warrants, which are held at cost and zero respectively, the Fund recorded a return of 11.6 per cent in 2009.

FF need to be held accountable.
The 25% warrants for banks shares is additional to the banks paying interest of the 7 billion + having to pay the 7 billion back and the NPF would have had investments that it could not just convert to cash without taking losses.

You're barking up the wrong tree here, but do work away.
 

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