IRELAND - The National Pensions Reserve Fund (NPRF) has seen its assets under management fall by €8bn over the past year, with its holdings in two troubled Irish banks to blame for the 36% decline in value.

However, despite the negative overall return, the fund’s discretionary portfolio - still controlled by the NPRF Commission, unlike the directed portfolio targeted at recapitalising Bank of Ireland (BoI) and Allied Irish Banks (AIB) - earned a preliminary return of 1.6%, outperforming Irish managed pension funds, according to the fund’s own estimates.

Releasing preliminary figures, Ireland’s reserve fund said that, despite a “very volatile year generally and declines in most global equity markets”, it was able to achieve the positive return through a “significant” tactical underweight in global equities, as well as the purchase of two-year put options.

Both decisions were made during the second quarter of 2011, with the sale of €500m in listed equities announced at the time. 

The discretionary portfolio rose to €5.4bn at the end of December, accounting for 37% of overall assets.

The remaining assets, targeted at the stabilisation of BoI and AIB, fell by €500m in value between September and the end of the year, with €9.1bn remaining of the initial €20.7bn injection into both institutions.

The scheme also shed some further light on the Strategic Investment Fund, first announced by minister for public expenditure Brendan Howlin in September last year, which would take the shape of individual funds within the structure targeting specific asset classes.

“The NPRF will be a cornerstone commercial investor in these funds with the expectation of increasing total fund size by attracting other commercial co-investors,” it said, noting that the investments it made would aim be “of importance” to the Irish economy.

The National Treasury Management Agency previously hinted at these expansion plans, saying that the NPRF would increase its exposure to domestic infrastructure, venture capital and small and medium-sized enterprises.

The fund now manages assets of €14.5bn, down by 36% from €22.7bn at the end of December 2010.

The fund’s discretionary portfolio has returned 3.3% a year since its interception in 2001.

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