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FRR awards 11 active corporate bond mandates [updated]

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Fonds de Réserve pour les Retraites (FRR) has awarded 11 active corporate bond mandates worth up to €8.5bn and increased the group of managers running its euro credit investments to six.

The mandates are split into two lots – the first consists of euro-denominated corporate bonds and other investment-grade debt in the currency, while the second consists of US-dollar-denominated assets of the same category.

The indicative size of the euro mandates is €5.5bn, while the US dollar mandates are for a total of some €3bn.

The fund has not yet decided on the size of the individual manager mandates, according to Salwa Boussoukaya-Nasr, CIO at FRR.

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“We’re still thinking about the distribution, which will depend on several factors, including on how we organise the transition,” she told IPE.

“In general, the shares are roughly equal, but there can be differences.”

FRR is to activate all the mandates now rather than have managers on standby, according to Boussoukaya-Nasr.

The plan is to implement the euro credit mandates first, and then the US dollar mandates, over the course of the next few months. 

The €37.2bn national pension reserve fund has awarded euro mandates to Allianz Global Investors, AXA Investment Managers Paris, HSBC Global Asset Management (France), Insight Investment Management, Kempen Capital Management and La Banque Postale Asset Management.

Allianz, Insight and Kempen are new hires, according to FRR’s 2014 annual report and Boussoukaya-Nasr.

The annual report lists Quoniam Asset Management and Standard Life Investments alongside AXA, HSBC and La Banque Postale as investment companies selected to run the same mandate for the fund from 2009.

Boussoukaya-Nasr confirmed to IPE that FRR was this time hiring six rather than five managers, given that the fund had increased its allocation to credit, particularly euro debt.

“Overall, for the size, we felt it was better to have one more manager than before,” she said.

She pointed out that an equal distribution of the €5.5bn mandate would mean giving each manager nearly €1bn.

“Those are still very large mandates,” she said. 

The new US dollar mandates, meanwhile, are to be managed by AXA Investment Managers, MacKayShields, BlackRock Financial Management, Morgan Stanley Investment Management and Wells Capital Management.

US-based fixed income manager MacKayShields will manage the mandate on behalf of BFT Investment Managers.

All but AXA and BlackRock would be new appointments, according to the fund’s annual report and Boussoukaya-Nasr, with BFT, Morgan Stanley and Wells replacing Conning Asset Management, Deutsche Asset Management and Schroders Investment Management.

FRR invests in euro and US corporate bonds as part of its hedging portfolio, which was just over half its total assets as at 31 December 2014.

Each mandate is for up to five years with the option of a one-year extension.

The public procurement procedure for the mandates was launched last January.

At the time, the pension fund said it would authorise diversification of up to 15% into bonds rated as low as BB-.

FRR is implementing a new investment strategy, having recently decided to invest €2bn in French illiquid assets, including infrastructure and real estate, after the government granted it a longer investment horizon.

Boussoukaya-Nasr said the fund’s strategy in this regard was focused on supporting the financing of the French economy.

In the context of the “energy and ecological transition”, it will also favour green projects such as renewable energy.

“We will work on this in all areas – private equity, private debt, infrastructure and, to a lesser extent, property, ” she said.

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  • QN-2559

    Asset class: Multi Assets.
    Asset region: -.
    Size: EUR 15m (may be split into two mandates EUR 7.5m).
    Closing date: 2019-09-06.

  • QN-2560

    Asset class: Private Equity.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

  • QN-2561

    Asset class: Infrastructure.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

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