The National Pensions Reserve Fund has lost €737 million since its inception in April 2001, equivalent to the Government's annual contribution of one per cent of GNP.
The pension fund's annual report published today reveals the fund lost 16.1 per cent of its value in 2002 as result of the poor performance of equity markets during the period. The fund's annualised return since its inception in April 2001 is -7.9 per cent.
The fund which was set up to defuse the so-called "pension time bomb" by setting aside money for future State and public service pensions has stemmed some of these losses in line with the recovery in equity equities so far this year. By the close of business last Friday the market value of the fund stood at €8,392 million reducing the capital loss to €332 million.
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The fund's chairman Mr Donal Geaney defended the performance of the fund saying its performance compared favourably with other pension funds enduring the bear market. The average Irish fund lost 18.9 per cent in 2002 and 11.6 per cent in the lifetime of the NPRF.
Mr Geaney said he remained confident that the fund would meets its objectives of meeting future pension liabilities and accordingly the fund's investment strategy of a heavy weighting in equities is geared towards a 20 to 25-year time horizon.
"Overall, the performance has been relatively robust inthe prevailing market conditions.
"It reflects the long-term strategy adopted, based on the Fund's objective of meeting as much as possible of the cost to the Exchequer of social welfare pensions and public service pensions to be paid from 2025 until 2055, and possibly beyond," he said in his chairman's statement.
Based on historical performance equities outperform bonds over any 20-year period, however within that period there are periods where the performance of the two can diverge considerably before returning to trend.
Responding to recent coverage suggesting that State funds might be better spent on infrastructure, the NPRF's chief executive Mr Michael Somers said the fund would be willing to invest in public/private partnership projects but there were few such schemes available in Ireland at present.