Irish investment firms fear that the entire National Pension Reserve Fund will be managed by international institutions.

The fund has already advertised the sub-funds which it intends to run and more than 1,000 applications from companies worldwide are expected. This will later be whittled down to 14 investment managers, each overseeing a small segment of the overall fund which will eventually top #8 billion (£6.3 billion) by the end of the year.

The process for deciding on the manager is a lengthy one . The initial expressions of interest will be reduced to a significantly smaller number after August 13th. The National Treasury Management Agency will shortlist companies on the basis of preset criteria including the ability to manage a mandate of the size of the funds applied for. These criteria have not yet been set out but this will be done in advance of the closing date.

A minimum of five managers and a maximum of 20 will be shortlisted for each sub-fund to be managed. Ms Deborah Reidy, of the NTMA, said there is no reason why Irish fund managers should not make this shortlist, provided they have experience in managing the type of fund they are applying to run.

At this stage, the qualifying investment houses will be asked in detail about their investment style and philosophy. Following this, a shortlist of three candidates will be drawn up for each sub-fund by the NTMA and its US-based consultants, Frank Russell Consultants.

Many Irish firms are worried they will not be in the Russell database and could thus be excluded from the process. However, Ms Reidy has insisted that this is not so and the US firm will have to do due diligence on any Irish firm which gets this far in the process.

A final recommendation will then be made to the Pension Fund Commissioners who are in charge of the fund. This will comprise just one manager per fund mandate.

The NTMA is also seeking an interim manager who will look after the funds and ensure no over-exposure to any one sector occurs while the funds are being invested. It has also not yet decided whether to phase the money into the markets. Some investment managers have also questioned the euro dominance of the fund which is to be 80 per cent invested in equities. Half of this is in euro zone assets as recommended by Mercer Consultants.

The fund will not invest at all in property or derivative or other investment. However, Ms Reidy said this is just an initial allocation and once the fund has bedded down such investments are likely.

The Mercer report is not available because of commercial sensitivity. According to Mr Paul O'Faherty of Mercer, the analysis involved consideration of the relative long-term prospects and volatility of major markets. It also weighed up the impact of additional currency risk associated with moving away from our domestic currency base - the euro - against the benefits of international diversification.