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France roundup: FRR private equity mandates; FRPS rules published

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France’s €36bn pension reserve fund has awarded three private equity fund-of-fund mandates for a total of between €100m and €400m. 

The mandates have gone to Ardian France, LGT Capital Partners, and Swen Capital Partners. A spokesperson for the Fonds de réserve pour les retraites (FRR) said the distribution of the capital between the three managers could not be specified at this stage.

The managers will be responsible for creating and running portfolios of funds allocating at least 80% of their assets to the equity or quasi-equity of unlisted French companies.

The mandates are for 12 years, and form part of the implementation of around €2.1bn of new allocations to unlisted French assets.

FRR has previously indicated that it would allocate around €900m to private equity, and has launched separate tenders for “innovation” and growth capital mandates, for up to €200m and €500m, respectively. 

It has already awarded €600m of private debt mandates.

Pension fund regulatory framework coming together 

Regulations governing a new type of occupational pension funding vehicle in France have been published.

The new entities – Fonds de retraite professionelle supplémentaire (FRPS) – were provided for by legislation known as Sapin II in late 2016. They will qualify as Institutions for Occupational Retirement Provision (IORPs) under EU law and are due to be subject to the revised IORP Directive when this is transposed in France.

Regulations were released on 19 July that set out rules for how the new entities were to be established and authorised, and how their governance, and financial and prudential management should be organised.

This comes after the French government in early April published an “ordinance” that set out the rules formalising the creation of the FRPS. The law ratifying this is going through parliament.

Another implementing regulation is awaited, which will set out how to carry out stress tests assessing coverage of solvency requirements over a 10-year period.

The FRPS will be subject to a bespoke regulatory regime based on quantitative measures similar to those of Solvency I regulation for insurers, with the addition of the aforementioned stress test, and governance measures similar to those provided for by Solvency II.

The intention is for insurance companies and mutual and provident institutions to be able to move certain types of occupational pension business out from under Solvency II regulation and into a regime that better reflects the long-term nature of pension provision.   

This involves being freed from Solvency II capital requirements, which are seen as penalising certain asset classes, such as equities. A recent Financial Stability Board “peer review” of France said the creation of French-style pension funds was intended to redirect €10bn-€20bn into financing the domestic economy.

Natixis AM to appeal overcharging fine 

Natixis Asset Management “strongly disputes” the decision of the enforcement committee of the French financial markets regulator concerning its “formula-based” funds activity, it has said.

The Autorité des marches financiers (AMF) last week announced that it had issued a warning to Natixis and fined it €35m because it considered the asset manager had breached its professional obligations in the management of some of its formula funds between 2012-2015.

Natixis said it intends to appeal the decision. It noted that the enforcement committee did not follow the AMF board’s recommendation in making its decision.

It said it believes that the decision is “unwarranted and disproportionate and firmly denies failing to fulil its professional obligations”. 

The AMF said its enforcement committee identified four regulatory breaches in relation to the redemption fees for some of the funds it inspected and in relation to the structuring margin of some funds. 

The €35m fine is the largest the French regulator has imposed. 

Natixis Asset Management said investors in its formula funds “were in no way adversely affected and were fully informed in accordance with applicable regulations”. 

Formula funds are a type of structured product that offer a guarantee of invested capital based on a pre-determined formula.

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