The national pension fund will be assessed in 2025 but questions now are appropriate, writes Una McCaffrey.

The National Pensions Reserve Fund is, by definition, an initiative to be judged over the long term. Its fundamental test is not due until 2025, when it will first be called upon to fund the social welfare and public-sector pensions of the Irish population.

But even with this long-term view it is not unreasonable for the public to ask questions on performance now, as the fund reaches the fifth of the 100 quarters that will chart its progress. After all, it is their financial future at stake - a fact acknowledged by Mr Donal Geaney, chairman of the commission that oversees the fund.

"It is not an overstatement that every member of the Irish population has a stake in the fund," he says in his chairman's statement.

Ordinary observers will not have been cheered by yesterday's news that the fund lost almost 4 per cent of its value in its first 15 months, or that further falls have undoubtedly been sustained amid the stock market turmoil that has characterised this, its 16th month. The commission has done its best to contextualise the decline, saying it is significantly less dramatic than the falls affecting the average Irish pension fund over the same period.

Further, and more justified, reassurance can be taken from the rules surrounding the fund: it is to be built up until 2025 and cannot be touched until then. In other words, it has another 23 years to win back its early losses. If equity markets perform according to historical norms over that period, the chances are that it will do so.

The fund began in April 2001, its initial €6.5 billion funding coming from revenue raised by the Government from the sale of Eircom.

The Minister for Finance, Mr McCreevy, has committed to topping up this provision every year for the 25 years of the fund's life, with this allocation currently fixed at 1 per cent of GNP. This contribution is added to the fund on a quarterly basis, with each injection amounting to about €258 million.

To date, the fund has committed €6 billion to the markets, with about €3.25 billion of this invested in equities and the remainder in bonds. A further €2.3 billion is being retained in cash until the commission judges the time is right to take its chances with the market again.

In the general scheme of pensions investment, this allocation would be judged as conservative, and a long way from the 80/20 split between equities and bonds the commission still plans. Yesterday, National Treasury Management Agency chief executive Mr Michael Somers defended this long-term strategy, pointing to consistent historical evidence of equities outperforming bonds over the longer term. Referring to the pensions fund as "a marathon, not a sprint", Mr Somers said "we have no reason to think the past won't be replicated in the future" in market cycles.

Looking forward, little to do with the fund is fixed, with, for example, the fund managers holding mandates to invest its assets open to being dismissed at a moment's notice. Mr Somers said yesterday the fund would not be interested in providing a cheap source of funding for "tarring every side-road in the country", but added that ventures such as toll roads may prove more attractive in the future.

Whatever happens, the commission has estimated that even after 25 years, the fund will only be in a position to meet 30 per cent of its liabilities, a statistic that should give more cause for concern than yesterday's performance figures.