Courts Service bid to ease fears over €1bn investment

THOUSANDS of vulnerable people have received a reassurance from the Courts Service that €1 billion it invested on their behalf has escaped the worst of the worldwide stock market turmoil.

The service manages the money for more than 20,000 people, made up of people who are wards of court for reasons of psychiatric illness or abandonment or children awarded damages in civil actions.

The fund stands at €932 million and although growth has dropped close to zero, investments outside the stock market have balanced out the effects of the crash.

In a report compiled for the Irish Examiner, the Courts Service said “given the volatility in financial markets generally the returns represent a very satisfactory outcome.

“Over the financial year ended September 30, 2007, the funds provided an average return of 3.9%,” it said.

“This performance was adversely affected by the subprime credit crisis and fears for global economic prospects which emerged in the third quarter of 2007.”

Predictions for this year have also been reassessed given the lingering instability. “These issues continued to depress returns in the last quarter of 2007 and into the first quarter of 2008. The average return for the fourth quarter in 2007 was 0.3%,” it said.

In 2003, the board of the Courts Service changed how it invested the money after an independent report by Mercer said the most was not being made of people’s assets. Bank of Ireland Asset Management and State Street Global Advisors won the contract to manage the fund.

Four types of investment package were established depending on how soon individuals would need their money, the value of the personal holdings and if there were ongoing payments as in the case of people made wards of the court. These investment packages had varying degrees of exposure to the stock market.

On the whole less than €200m in this fund is directly linked to the stock market.

In January, financial markets around the world experienced their worst collapse since the terrorist attacks on New York and Washington in 2001.

Because Irish pension funds are closely tied with companies listed on the ISEQ index, in 2007 up to €2bn was wiped off the value of these funds.

Declines have been continuing throughout the first six weeks of this year.

In contrast, the Courts Service said the poor performance of the equity markets had been balanced out in its fund with better returns in its investment in bonds and cash reserves.

The current financial turmoil has coincided with a review of the fund, which the Courts Service commissioned.

This review is being carried out by Mercer to examine if the investment portfolio is meeting the needs of its many thousand beneficiaries. This report is due to be completed by June.

To whom does the €1 billion fund belong?

Money belonging to more than 20,000 people is being held in the Courts Service fund. This includes assets belonging to children who have been made wards of the court in cases of neglect, abandonment or if their parents die without a guardian being appointed.

The majority of people taken into wardship are adults under the protection of the court for medical or psychiatric reasons.

The fund also holds the assets of children, who have been awarded damages in civil cases, until they turn 18.

Under 1958 legislation, the courts are required to properly invest the funds.

It charges each person €750 for management of these assets, but only if the individual’s income goes above €18,750 that year.