The National Pensions Reserve Fund (NPRF) has reported a 4.5 per cent return on investment for the six months up to June 30th. The fund made a return of 1.8 per cent in the quarter to the end of June.

The performance brings the fund's total value to €10.6 billion and represents a return on investment of €450 million for the first six months of the year.

The fund was created to provide partial funding of Ireland's pension costs from 2025.

The NPRF Commission's annual report for 2003 shows its investments earned a 12.8 per cent return during the year. The fund has outperformed its benchmark by 9.6 per cent since the it was established by the Government in 2001.

Since the establishment of the fund, the commission has been working towards having 80 per cent of its assets in equities. During 2003 ,€1.9 billion was committed to world stock markets and at the year's end the percenage of assets in equities was 71.5 per cent.

"As markets started to recover from March 2003, we accelerated the pace of investment," said Mr Donal Geaney, chairman of the commission.

"Our policy of phased entry to the capital markets has paid dividends in allowing the fund to invest at lower market levels and to benefit from that approach as the recovery took hold."

With equities now equal to 75 per cent of total assets, Mr Geaney said the fund's start-up phase was substantially completed.

It is intended that 2 per cent of the fund will be put in equities of smaller companies, 2 per cent in corporate bonds, and 4 per cent in property. An undetermined amount will be placed in private equity while €200 million will be placed in public-private partnerships.

The value of the fund at December 31st, 2003 was €9,561 million. During 2003, the Exchequer put €1,103 million into the fund and there was a further €1,032 million gain from returns on investment.

At the end of 2003, 14 per cent of the fund's assets was in bonds while another 14.5 per cent was in cash. The fund had shareholdings in 1,286 companies in 23 markets and its assets were the equivalent of 8.8 per cent of GNP.