IRELAND - The e10.1bn National Pensions Reserve Fund posted returns on investments at 2.7% in the first quarter of this year, and 12.8% in 2003.
During the year, the value of the fund increased by just over e2.1bn, of which e1.032bn was earned from investments and e1.103 came from exchequer contributions.
Equities were the real drivers of growth, achieving an investment return of 18.1%. The pace of investment in equities accelerated as markets recovered from March 2003 and currently 76% of the fund is invested in world stock markets, said Donal Geaney (pictured), NPRF chairman. Ultimately this will reach 80% in keeping with the NPRF Commission's strategy.
While the fund reported losses of e737m in 2002, the fund did avoidpotentially much larger losses by gradually phasing in investments.
At the end of 2002, the fund was still 21.6% in cash, which fell to 14.5% at end 2003 as the fund increased its equity allocation to 71.5%.
Through the course of 2003, the NPRF incurred fees and expenses in the operation of the fund of e14m, leading to a 0.2% drag on performance. This figure takes account of offsetting income earned by the commission from value added activities such as the securities lending and brokerage recapture programmes.
In 2003, the NPRF also approved allocations to small cap equities (2%), eurozone corporate bonds (2%) and public private partnerships (e200m).
The allocation for PPPs will be increased if suitable opportunities, providing sufficient returns, arise.
The financial markets still face considerable geopolitical and economic uncertainty, said Geaney. The experiences of 2002 and 2003, and the wide disparity in returns to the equity markets in these two years demonstrate the volatility that can occur over short timescales.
“However, the fund can afford to bear this in anticipation of excess returns from equity investment over the longer-term. This consideration is central to the Commission's investment strategy, he concluded.
The NPRF continues to consider real estate and private equity investment opportunities.
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