FRR, the €27.7bn Fonds de Réserve pour les Retraites or French Pensions Reserve Fund, says it needs a modification in the law to enable it to invest in real estate on a flexible basis.

The fund recently unveiled a sweeping revision to its strategic asset allocation - which featured a shift towards ‘alternatives' such as commodity indices, real estate, infrastructure and private equity.

It already has a tender in the market for private equity and is considering how to approach the commodity arena.

But investments in real estate, where it feels it would need to be flexible, would require a modification in the law, which executive director Antoine de Salins hopes to have in place by the end of the year. It was a technical, not a political issue he said in an interview.

De Salins' colleague, strategy head Christophe Aubin, added that the planned 10% allocation to alternatives could be a "transitory stage" for the FRR. "Maybe in future it could be more. For us it's just a step."

If it wanted to raise the allocation it would need to go to its board in 2007/08 to look at the results of the alternatives portfolio.

De Salins pointed out that just having two asset classes, bonds and equity, was a major source of risk.