The collapse of Iceland’s financial system and the failure of its major banks in 2008 generated a pressing need for revitalisation of the Icelandic economy. On 8 December 2009 a limited partnership, the Enterprise Investment Fund slhf. (EIF), was formally established by 16 pension funds belonging to the National Association of Pension Funds, with the aim of participating in and shaping the financial and operational restructuring of the Icelandic economy. EIF intends to achieve this objective by investing in promising Icelandic companies in all economic sectors. Its aim is to build up strong companies with the potential of becoming leaders in their respective fields while generating sound returns for investors. The Fund is authorised to invest outside Iceland and has plans to participate in investments in companies that can be made more efficient through streamlining or stronger through mergers with other companies.
The sixteen Icelandic pension funds around the country, representing about 64% of the total assets of pension funds in Iceland, have pledged to contribute ISK 54.4 billion in share capital to the Enterprise Investment Fund. Institutional investors other than pension funds, such as Landsbanki and VÍS, will also be permitted to become shareholders in EIF slhf. However, the total holdings of other institutional investors will be capped at 49% of EIF.‘s share capital.
A seven-member Board of Directors is responsible for mapping out the Fund’s investment strategy based on a report prepared by an independent twelve-member Advisory Board, which is appointed on the basis of shareholder nominations. The Fund will engage in new investments the first three years, and remain in operation after that for a total of seven years. It’s operations can then be extended twice, for one year at a time, up to a total of 12 years.
EIF in a nutshell:
- Objective: to contribute to the reconstruction of the Icelandic economy
- Initial capital: ISK 54,4 billion
- Initial shareholders: 16 pension funds (holding 64% of total pension fund assets in Iceland), Landsbankinn and VÍS
- Temporary operations:
- Years 1-3: Build up asset portfolio
- Years 4-10: Operate asset portfolio, sell assets
- Years 11-12: Optional extension of operations