The National Pension Reserve Fund (NPRF) is still nursing a loss of €332 million, despite having benefited from a recovery in investment markets since the start of the year.
The fund, which was established in April 2001 to help meet the cost of social welfare and public service pensions, lost 16.1 per cent or €737 million last year, according to its annual report released yesterday.
However, the fund's chairman, Mr Donal Geaney, said the recovery in stock markets since the end of March had helped the fund to claw back some of the losses.
As of last Friday, it had a market value of €8.39 billion, €330 million (3.8%) less than the Government's contribution of €8.72 billion to date.
Mr Geaney said yesterday that the fund had not yet reached the recommended asset allocation of 80 per cent equities and 20 per cent bonds.
"This is due to a degree of caution on the part of the commissioners given the uncertainty in equity markets," he said, referring to the seven-member commission which controls and manages the fund. The fund is currently 65.5 per cent invested in equities with 16.3 per cent in bonds and 18.2 per cent still in cash.
In monetary terms, €5.4 billion was invested in shares, €1.4 billion in bonds and €1.6 billion in cash as of July 18th.
However, the NPRF is planning to extend its investment into other asset classes.
It will seek tenders from fund managers to manage two small capitalisation equity funds and a corporate bond fund in coming weeks while it intends to invest in property.
It will also undertake further research into investing in private equity, absolute return funds and emerging market assets.
Investing in public private partnerships also remains on the agenda although the fund has yet to find any projects that will deliver a commercial rate of return.
"We have made it very clear that if we could get into public-private partnership projects, we would be delighted to get into them," said Dr Michael Somers, chief executive of the National Treasury Management Agency (NTMA), which manages the fund.
Responding to recent suggestions that the Government should suspend its contributions to the fund, worth 1 per cent of GNP each year, and invest in infrastructure instead, he said the two were not "mutually exclusive".
However, the fund remains a source of political controversy.
The Green Party questioned its rationale yesterday, saying it would rather "allocate the pension reserve funds to new transport projects so that the tolls of tomorrow go to pay for our pensions rather than to pay a private financier".
The Labour Party accused the Minister for Finance, Mr McCreevy, of borrowing money "to finance continued gambling on international stock markets".
Despite the losses incurred last year, the NPRF said it was satisfied that the fund managers who run its various portfolios performed satisfactorily relative to their benchmarks.
Last year's losses were a function of weak market conditions rather than a poor performance by the fund managers, Mr Geaney said.
Meanwhile, the report showed that the fees paid to the 15 international investment managers responsible for investing the fund totalled €5.98 million last year.
