US fund bets €1.9bn on Irish recovery

Gambling huge sums of money on unsafe investments may have got this country into its mess, but one US mutual funds company has bet billions that Ireland can bounce back from the brink of disaster.

After considered research by its analysts, since last summer, California-firm Franklin Templeton took the calculated $2.5bn (€1.9bn) risk to pump its clients’ money into Irish government bonds. It did so at a time when investors elsewhere in the world could not get rid of their investments fast enough.

And its confidence vote is not confined to Ireland. The firm has also placed a $3bn bet on Hungary’s recovery.

The man gambling with what is individual investors’ money is Michael Hasenstab.

According to the New York Times, the 38-year-old and his team currently control $165bn in assets, making him one of the firm’s biggest money makers.

While he has not commented on his investment in Ireland, Mr Hasenstab previously admitted he is not afraid to buck the trend and has also written in glowing terms of our recovery efforts.

In a video posted on the Franklin Templeton website last October, he said: “We take a long-term perspective. It’s a research-driven perspective and we’re often contrarian, and that has been the case for decades and I think will remain the case for decades to come.”

In the same month, he wrote a piece for the Wall Street Journal, which was also published on the company website, in which he said “Ireland’s example could offer other indebted countries some inspiration for solving their own crises”.

“Ireland was brought down by its wayward, over-leveraged banking system, which fuelled a private-sector credit boom and a real-estate bubble,” he wrote.

“But this financial froth belied strong economic fundamentals and two key competitive advantages for the country: a skilled labour force and a business-friendly regulatory and tax environment. Moreover, fiscal policy was prudent leading into the crisis.”

Later he praised the country’s banking policy, which he said had pulled the financial institutions “back from the brink”.

His decision to buy up such a large chunk of government bonds here has been repaid as they have performed far more strongly that Hungary, rising 35% since the middle of last year.