Shay Brennan presses NTMA on tariffs, net debt and fund strategy

Thank you folks for joining us here today. I have a number of questions, might not get through them all, but if we get brief answers we might have a chance of doing that. So the NTMA obviously takes a view of the markets and what's going on in the national, but more importantly global economy. Have you done any modelling on the impact of tariffs or Ireland's actions, or potential actions in relation to Israel, on what that may do? Have you looked at that, have you done modelling on that, and what have you considered? So in terms of modelling the tariffs, we would tend to, in a lot of cases, our economics unit, small unit, would take from any estimates done by the Department of Finance. Obviously you would also see some publications around the SRI, what they said about the impact of tariffs, and of course there's a lot of speculation on the levels of tariffs. So we would really work from that basis, and rather than, in fact, you know, when we're on the road talking to bond investors, often what you don't want is there's a forecast from the Department of Finance, and then a separate forecast from the economics team in the NTMA. So we would take any estimates from the Department, and reflect on that in any modelling, yeah. Okay, so you take the Department of Finance forecasts and modelling. Yeah. Okay, great, thanks. In relation to the net debt figure, I just want to try and understand that. So that's 167, and that's based off 218 billion debt, and whatever's in our two sovereign wealth funds. That still leaves a gap, 40, 50 billion. Yeah. Okay. What is that? Is that short-term cash? Predominantly, yeah. So for example, at the end of June, we had 33 billion of cash on account, so that was a big part of it. And then as you rightly said yourself, contributions and the current holdings within the fifth, those balances count as assets against net debt. So that's the majority of... How do you manage that cash? Also what would be in the social insurance fund, for example, which isn't positive at the moment. Yeah, yeah. Okay. That's a substantial cash balance, short-term cash. How do you manage that? Where is that kept? Is that liquid? And how do you balance the return versus liquidity on that? Yeah. Yeah, no problem. So predominantly, that cash would be held, for example, the dominant fee would be Central Bank of Ireland, for one example, sovereign treasury bills across European jurisdictions, Germany, France, Belgium, and an array dependent, once they all fit within our credit policy. That's the predominant. So between the Central Bank and... We do, in fact, do a small amount of lending to other debt offices, you know, overnight liquidity, et cetera. So, but they would be the main component, Central Bank and sovereign treasury bills. Then in terms of return, you're absolutely right. One thing we'd be very conscious at any time, if you have a cash buffer, you know, are you borrowing higher and you're putting on deposit at lower rates. But what you would find, and particularly back when we borrowed, you might remember, even when we didn't need the funds during quantitative easing in COVID, previous quantitative, we decided to continue borrowing more than we needed. We pre-funded the state because rates were particularly low. You might remember, in some cases, they went negative. And because some of that money was borrowed at zero, half a percent, one percent, when current interest rates, short-term interest rates are around two percent, you'll actually find we have a positive contribution. If you take recent borrowings, we did a 30-year bond for the long term at about 3.15 earlier this year. That's now, if you were to go into the market now, you'd be paying about 3.75. Those funds, if you have borrowed at three and you're placing on short-term deposit till the cash is used by the exchequer, obviously would come and go. But overall, given where we've funded everything else right now, cost to carry is rather negligible or on the positive side. But that changes over time, and we're very conscious of it. But I would always, we would always recommend having a sufficient cash buffer. It's just, it is elevated at the moment, post the Apple decision in Europe, and obviously the government will make decisions in due course how to expend. Okay, thanks. The two sovereign wealth funds, what's the investment strategy broadly around those? And maybe you could comment on the targeted percentage return, but also how liquid are those investments? Yeah. Okay, so maybe, Deputy, what I'll do is, you're correct, so we have ISAF on the one hand, which I might get Nick to talk about in a second, and then the new mandate entrusts us the future Ireland funds. I might just briefly touch on that. It's the deputy's time, so whatever. Okay. So, the future Ireland fund, as you know, the new funds, which are two funds, the future Ireland fund, to put away 0.8% of GDP till 2041, if possible, and that will be invested in the long term, and the ICNF, which is the Infrastructure Climate and Nature Fund, more of a counter-cyclical fund, and funds to help with climate. They're the two funds. Basically, the money that's due by the end of the year means, as per the slides, there'll be about 16.5 billion in those funds, 12.5 in the fifth, and four in the ICNF. Right now, those funds are invested on an interim strategy, which is a very conservative, fixed income in Europe, until we get the approval of the long-term strategy. We've established an investment committee, two board members of the agency, and four people, international experts from around the world, as you may have seen. The long-term strategy has been approved by that committee and the agency board. It's now with government for consultation, and we wait to hear back. That's per the legislation. So right now, it's in term. It's invested in very conservative, low-risk, fixed income in Europe, pending approval from government, and then there will be a transition phase to invest it. And then briefly, to give you a sense of the strategy, without getting into the details, broadly, you'll expect the long-term fund to 2041 would have a long investment horizon, so that predominantly will have a lot more equity risk and less bond risk, so that will be for the long term. And then the ICNF, because liquidity can be drawn per the legislation soon, and in fact, the 3.15 billion for climate can be drawn in the near term, regardless of economic conditions, we'll keep that in a much more conservative, liquid, short-term horizon, because it may be called soon. So that's the fifth. I'll try to be as short as I could, and maybe Nick on the ISAF. Yeah, okay. Debbie, the key core strategy for ISAF is to make commercial investments that have a positive economic and employment impact in the state. And we have two portfolios. We have a portfolio of Irish impact investments, where we've done that. And then we have a reserve portfolio, a global portfolio, which is held in low-risk, liquid global securities around the world. The Irish strategy focuses on four key themes that are designed to help the state meet key challenges where commercial investment can make a difference. The first theme is climate, both near-term and long-term investments to help the state meet its climate targets. The second theme is housing and enabling infrastructure. So that's a lot of housing, finance for housing development for mass market housing on a commercial basis, but also regional infrastructure. We've focused on five key regional cities and doing urban regeneration and commercial real estate in those areas, and also small-scale infrastructure. And then thirdly, we have a focus on scaling Irish businesses. So that's a whole spectrum of funding from seed through venture capital, growth capital and private credit, direct and indirect. And then the fourth theme is food agriculture in the marine, where we're looking to firstly help that sector decarbonise, and secondly, avail of the kind of the opportunity that Ireland has in the market for sustainable food systems globally. Thanks. And Mr. Ashmore, just on ISAF, are we now fully divested of the companies on the UN Human Rights Council database? So in April 24, we divested of a number of companies, which at the start of 24 were valued about 2.947 million, and they were largely local banks in Israel. But we do retain a number of companies that are on the list, but aren't necessarily as deeply exposed to the Israeli local economy and the risks in that region. And at the end of 24, those holdings across six securities totaled at 7.764 million euros. And are there plans to continue holding or the time being? Yeah, we're keeping that portfolio under review. It was a risk-based decision to divest in the first place, and we monitor those risks very closely. Thanks. Just briefly on the fraud case, you mentioned the figure of 1.54 million recovered. How do you partially recover? Is the banking question contributed to that, or how is that not full recovery or no recovery? Yeah. So look, just to clarify, it's 1.52 million. Recovery is important. All I'd say is you can imagine when fraud actors get money, they try to move money, they try to disperse. And I won't say any more than that, given there's an ongoing investigation. Okay, that's fair enough. Has there been any other such fraud in any of the NTMA bodies or any of the new area companies in the past number of years? Nothing comparable to this new era? I'm not aware of any in new era either. No, deputy? Just on new era, I'm conscious there isn't anyone from new era necessarily here today. But of the 24 companies, it would seem, looking at the balance sheets, there's a substantial amount of cash there, and along with a substantial amount of debt. Has any thought ever been given to an intercompany centralised treasury operation to offset one against the other across the companies? Well, firstly, so deputy, sorry, obviously, I think your invitation had three members and we brought clear and estate claims and thank you for allowing us to do that. So it's not because we have some, we have obviously six mandates now and we would have a lot. So in terms of new era, new era gives advice to government, it would be a policy matter for government on whether to look at those boundaries. One of the advantages though, to your point, since new was established in 20, in the early 2011, 2013 got up and running with six dozen, but now with 24, it does give government a sight of the whole portfolio. And as you'll probably see from the annual report, that portfolio companies are generating close to two billion in profits and had a dividend, I think it was 337 million with 321 back to the exchequer. So exactly those kinds of questions. Often what I see from the team and here is, is they can see in different cases, pension schemes and different entities, and they can advise the government with that holistic view. So questions like that may arise, but ultimately it will be finally a policy matter for the line departments. Very funny, one quick question. Just very briefly, succinctly on both sides. So staff bonuses rose 13% to 3.22 million. What KPIs drive variable pay? Generally performance-related pay, which is not uncommon in the market where we compete for for talent and expertise. Generally it's down to the individual performance, their unit performance, and the NTMA overall would be the nature of the performance metrics. And then, of course, at the end of the year, any of those recommendations would come in. It won't surprise you, in terms of overall review for myself, the Chief Legal Officer, Chief People Officer, and then of course that would have to go to the REMCO committee, subcommittee of the board. Thank you, folks. Thank you.