Joe Costello (Dublin Central, Labour)
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Question 424: To ask the Minister for Finance if the National Pensions Reserve Fund employs a New York-based hedge fund to help manage the fund; and if he will make a statement on the matter. [31904/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The National Pensions Reserve Fund was established in 2001 under the National Pensions Reserve Fund Act 2000. The purpose in establishing the Fund was to meet as much as possible of the cost to the Exchequer of social welfare pensions and public service pensions to be paid from the year 2025 until at least 2055.

The Act provided for the establishment of the National Pensions Reserve Fund Commission. The Commission is solely responsible for the control, management and investment of the assets of the Fund (other than assets which the Minister for Finance has directed the Commission to invest in a listed credit institution under the provisions of the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Act 2009) and for determining the investment strategy for the Fund in accordance with Fund investment policy. The Commission is required to invest the assets of the Fund so as to secure the optimal total financial return, having regard to the purpose of the Fund and the eventual requirements on the Fund to make payments to the Exchequer, provided the level of risk to the moneys held or invested is acceptable to the Commission.

As set out in its Annual Report 2009, the NPRF Commission has made some changes to its strategic asset allocation following a scheduled review of its long-term investment strategy during the second half of 2009 and in early 2010. The Commission's revised asset allocation strategy remains focused on investment in real assets and on maximising return within acceptable risk levels over the long term. The revised strategic asset allocation includes a 5% allocation to absolute return investments. Such investments seek an absolute return in all market conditions rather than seeking to outperform a market index. In general, absolute return funds seek to insulate themselves from market movements and, for example, to profit from mispricings of securities or asset classes. The attraction of absolute return funds is that, by allowing the Fund to diversify away from equity and credit market movements, they are expected to reduce the Fund's overall volatility. The Commission's first new investments in this absolute return investments are expected to consist of a small number of funds of hedge funds.

I understand that the NPRF Commission has appointed Aksia, a New York-based fund of hedge funds consultant, to provide consultancy services for the selection of a portfolio of funds of hedge funds.