The manager of the €7.5 billion-plus National Pension Reserve Fund has recommended that Irish equities should not receive any special treatment. Writing in the current issue of the Irish Banking Review, the director and head of euro debt at the National Treasury Management Agency, Mr John Corrigan, said the agency would not see the fund being "overweight" in Irish equities.

The NTMA will manage the fund, which is intended to meet future social welfare and public service pension commitments. The agency is of the view that the fund should invest in the Irish market in proportion to Dublin's share of the global equity market. This implies that only 1 per cent or less of the fund - which will grow to more than €30 billion - will be invested in Irish shares.

The proportion could be even smaller if the fund opts to invest only in Irish stocks that feature in eurozone indices. Mr Corrigan's comments are the first public statement by the NTMA on the issue since it emerged last month that Jefferson Smurfit Group and a number of other Irish companies had been lobbying the Government and the NTMA on the issue.

Smurfit is understood to have lobbied for up to 15 per cent of the fund to be invested in Irish equities. It argues that the level set by the new fund will become the benchmark for other Irish fund managers and will lead to sustained selling of Irish shares. The NTMA will be formally appointed manager of the fund when it is established on April 2nd. The €6.5 billion that has been earmarked for the fund - including the proceeds of the Eircom flotation - will be handed over at that stage.

Another €1 billon is due to be paid into the fund under the terms of its establishment which specify that 1 per cent of GNP should be paid into it annually. The €500million-plus that the Government has raised through the sale of the TSB bank and ICC Bank may also be paid into the fund.

The seven National Pension Reserve Fund commissioners will take up their appointments at that stage. Mr Donal Geaney, chairman and chief executive of Elan Corporation, will be chairman of the commission. The other members are: Mr Robert Curran, second secretary in the Department of Finance; Ms Brid Horan, general manager of pensions with the ESB; Dr Martin Kohlhaussen, chairman of the board of managing directors Commerzbank; Mr Donald Roth, managing partner of the Emerging Markets Partnership; Mr Dan Tully, chairman emeritus of Merrill Lynch & Co; and Dr Michael Somers, the chief executive of the NTMA.

The decision on what proportion of the fund should be invested in Irish shares will ultimately rest with the commissioners.

Although the fund will be established in April, it is unlikely to make its first investments until the third quarter of the year as the process of appointing submanagers and advisers will be subject to a Europewide tendering process.

One of the first issues that will have to be addressed by the commissioners is whether they want to use options or other derivative instruments to try to take advantage of the current depressed state of world stock markets.