Pension fund sold Italian/Spanish bonds in time
Published 10/08/2011 | 05:00
THE National Pension Reserve Fund -- which is supervised by the NTMA -- sold its portfolio of Spanish and Italian bonds before the latest implosion on the European bond market, it has emerged.
The NTMA sold billions of euros of assets in February and then March and while most of the sales were equities, it is understood the fund also sold its eurozone government bond holdings by June.
This would have saved the fund significant sums as Italian and Spanish bond prices have been falling since late June, although yields dropped this week following ECB intervention.
It is estimated that global equities have fallen almost 20pc since a peak in April, meaning that the pension fund avoided significant losses by moving earlier in the year. The fund sold its holdings on foot of the IMF/EU bailout package which includes money provided by the Irish State.
The pension fund is providing €10bn for this purpose and has put this sum on deposit with the Irish banks, leaving it with €5.3bn in its so-called discretionary fund.
Asked would its remaining shares have to suffer substantial writedowns because of current market turbulence, a spokes-man for the fund said it had taken measures to deal with this. The first was to cut its exposure to shares by €500m.
It also bought options to make sure it wouldn't have to suffer losses when getting out of its positions. These equity options or derivatives allow holders to sell at above market prices.
The pension fund's discretionary portfolio earned a return of -0.7pc in the three months to end June 2011. This was largely due to global equity markets being slightly down in euro terms over the second quarter, it said recently.
The fund also holds shares in AIB and Bank of Ireland as parts of its directed investments
"Since the fund's inception in 2001, the annualised performance of the discretionary portfolio is +3.3pc per annum. The directed bank investments produced a return of -9.1pc over the quarter which was attributable to movements in the ordinary share prices of AIB and Bank of Ireland," according to the fund's latest release.