Mr. Nick Ashmore:

The Deputy is right that the time horizons for the two different funds are starkly different. The necessity to have funds available to be able to liquidate and provide funds at 22.5% of the fund in any particular year necessitates a shorter-term investment strategy which will speak to a higher proportion of fixed income and a question as to whether we would include equities in that portfolio at all. It will be a matter for the agency board to make that assessment and to come up with a strategy that reflects that. That is liable to be global fixed income, often sovereign bonds, high-grade corporate bonds and those kinds of things, that will provide an income but will give a high degree of confidence that the money is there when we need it.

For the future investment fund, it is a much longer term time horizon, not just in terms of the time to provide a payment out to the State, but that the payment is actually anticipated to be made on a sustainable basis. Therefore, when we hit 2041, we are not going to liquidate the fund over time. The fund will be invested on a perpetual basis but in such a way that it provides that payment to the State on an annual and reasonably consistent basis in order to ensure there is a fair distribution of the proceeds across generations as well. That is a very long-term time horizon and it will speak to a higher risk appetite for the fund.

The continued nature of contributions to the fund is also helpful in mitigating risk and bearing a higher level of risk over that initial period and beyond. I imagine there will be a phase, as contributions are coming in, where risk is high, with a higher proportion of equity-type risk and maybe alternative assets as well.

Then, from 2035 onwards we will have to start thinking about that forward plan for five years as to what money might be paid out from 2041 onwards. It may well be that the portfolio is adjusted somewhat in that respect to have a higher proportion of investments that bear income, either dividends or interest, and also that the risk profile is right to create a sustainable and consistent payout over time. It will evolve over time therefore but initially, that long-term time horizon will mean that fund has a high-risk capital.