The NPRF said it had reduced its listed equity exposure by €500 million, representing 10 per cent of its “discretionary portfolio” - the portion of its assets not yet tapped by the State.
The fund used the money to purchase financial instruments known as “put options”, which shield investors from adverse price movements in equity markets.
It said the two-year options would protect €1.3 billion of the NRPF's quoted equities holdings of €1.7 billion, while still retaining the capacity to gain from any upward price movements.
In its half-year update, the fund said today it had liquidated €10 billion of assets during the first half of 2011 to fund part of the State’s €17.5 billion contribution to the EU-IMF rescue deal.
As a result, the fund’s discretionary portfolio, which excludes public policy investments in Bank of Ireland and Allied Irish Banks, has reduced in size to €5.3 billion.
The fund’s directed portfolio, which includes investments in the banks made at the direction of the Minister for Finance, is now valued at €15.5 billion, and comprises both ordinary shares and preference shares in AIB and BoI in addition to the cash realised from asset sales and set aside for the EU-IMF programme.
At the end of June, the total size of the fund was €20.8 billion, down 8.3 per cent in the year to June.
Continued volatility in euro-denominated stocks saw the fund’s discretionary portfolio fall in value by 0.7 per cent in three months to June.
Since the fund’s was established in 2001, the annualised performance of the discretionary portfolio has averaged 3.3 per cent per annum.
However, the fund saw a 9.1 per cent plunge in the directed portfolio attributable to downward movements in the ordinary share prices of AIB and BoI.
The €10 billion liquidated to fund the State’s contribution to the EU-IMF was placed on deposit with Irish commercial banks and was expected to be invested during July in further capital to be raised by both AIB and BoI.