The National Pensions Reserve Fund, set up by the Minister for Finance Mr McCreevy to provide for future pension needs, had lost €763 million by the end of last year, initial estimates show.

The fund, which has received contributions of €8.16 billion to date, was worth an estimated €7.4 billion at the end of December, according to preliminary figures compiled shortly before US equity markets closed on Tuesday.

More than €300 million was wiped off its value in December alone, a bad month for equity markets worldwide.

However, the NTMA noted that the performance of the fund came against the background of "a virtually unprecedented three-year successive decline in global equity markets".

NTMA chief executive, Dr Michael Somers, also pointed out that the fund had done better than other Irish managed pension funds.

From its inception in April 2001 to the end of November, the National Pensions Reserve Fund was down 8.64 per cent compared to a loss of 14.7 per cent for the average Irish managed pension fund.

Based on the tentative estimates provided by the agency for the period to the end of December, it was off 13.25 per cent in the 20 months since its inception and 16 per cent over the course of last year alone.

This compared to losses of 19.5 per cent and 19 per cent respectively for the average Irish fund over similar periods.

The fund, which was set up using the proceeds from the Eircom flotation and a regular contribution from the Exchequer equivalent to 1 per cent of GNP, is 80 per cent invested in equities with 20 per cent in bonds.

The NTMA said the asset mix reflected the long-term nature of the fund from which there will be no drawdown for 25 years. The split had been reviewed following the September 11th terrorist attacks in the US and again last June but the advice was that it should remain unchanged.

Since July, the fund has invested nearly €500 million, mainly buying US equities at lower levels, according to its director, Mr John Corrigan.

A further €1.8 billion of the fund is still held in cash but the fund plans to continue investing in equity markets, looking for buying opportunities at lower levels.

It will also consider investing some of the remaining cash in public-private partnership projects, although Dr Somers noted that it had not yet been approached with any projects, good or bad, and was awaiting opportunities.