IRELAND – The National Pension Reserve Fund remained underweight its benchmark bond holding last year as a result of a “tactical decision” not to commit to bonds in the current interest rate situation.

“At 12.7% the fund remained underweight its benchmark bond holding of 20%,” the National Treasury Management Agency, which runs the scheme, said. “This is as a result of a tactical decision by the Commission not to commit additional moneys to bonds at the current stage of the interest-rate cycle.”

At the end of 2004, the NPRF’s bond holding was E1.48bn. Equities accounted for 76% of holdings, at E8.88bn. The fund committed E1.415bn to the equity markets in 2004.

The scheme’s total assets rose to E11.686bn from E9.56bn at the end of 2003. The state contributed E1.177bn while there was a market appreciation of E948m. Total investment return was 9.2%.

The fund also said that it began its real estate investment programme in December 2004. “The Commission will assess the market indirectly through property investment vehicles rather than through acquiring and holding a property portfolio,” it said.

The NPRF is also involved in a consortium that plans to bid for a contract to upgrade Dublin’s M50 orbital motorway. It has made a E200m allocation to such projects and will increase this “should opportunities arise”.

The NTMA said the scheme is regarded as a “very significant positive factor for Ireland’s credit rating”.

“As a result of its establishment and the country’s favourable demographic profile, the fiscal impact of the ageing of the population will be felt much later and less severely in Ireland than in other European countries.”

In December Standard & Poor’s affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on Ireland. It said the ratings were supported by the “favorable demographic structure and future pension liabilities”.

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