France’s pension reserve fund gained 4.97% in 2016, driven by its equity, high yield, and emerging market bond investments.

Fonds de Réserve pour les Retraites (FRR) splits its overall portfolio in two, a return-seeking portfolio and a hedging, or liability-matching portfolio.

The return-seeking portfolio returned 8.2%. FRR said the good performance of its index-tracking investments in this portfolio was the main driver behind the fund’s overall return.

The hedging portfolio returned 3.1% in 2016, which FRR attributed to interest rates falling over the course of the year and a reduction in the risk premiums on US dollar-denominated corporate bonds.

FRR’s net assets amounted to €36bn at the end of 2016, down by €341m from December 2015.

This is roughly the same amount of assets that FRR held before a pensions reform in 2010 radically changed its business model by introducing a fixed nominal liability schedule and stopping all cash inflows.

Since then, FRR has transferred €12.6bn in annual payments of €2.1bn to Caisse d’Amortissement de la Dette Sociale (CADES), the agency responsible for paying off France’s social security debt.

This was largely offset by cumulative net gains of €11.6bn over that period, which meant that its portfolio has only shrunk by €1bn since the beginning of 2011.

Its annual performance since then has been 5.4%.

FRR said it had assets worth more than 160% of its liabilities, representing a surplus of €14.27bn as at 31 December 2016. This is up €1.17bn from last year.

It highlighted that it made €204m of investments in French private assets in 2016, and that it will expand its investments in this area in 2017 as it implements the bulk of a new €2bn allocation.

It recently awarded a €600m private debt mandate and will also be allocating €900m to private equity.