National Pension Reserve Fund
Minister for Finance (Mr. Cowen): I propose to take Questions Nos. 25 and 46 together.
I was pleased to note that the commission reported a return of 9.3% in 2004 or an appreciation of €951 million in fund value, excluding the 2004 Exchequer contribution of €1,177 million.
As with its investment strategy, the fund’s benchmarks are determined by the commission and I have no role in relation to them. I note from the review that the fund’s return of 9.3% in 2004 was achieved in the context of the completion of the commission’s averaging-in or phased entry programme to the capital markets. The review points out that such a strategy will under-perform its benchmark in a rising equity market due to its holding less equities and more cash than the benchmark. Conversely, it leads to out-performance in a falling market.
It is only fair to judge the success or otherwise of the commission’s averaging-in strategy over the full period for which it was in effect. In this regard the review states that the averaging-in programme has seen the fund out-perform its strategic benchmark by a cumulative 8.9% over the period since its inception in 2001.