FRANCE - The Fond de Réserve des Retraites (FRR) saw its total asset value and financing ratio shrink in the third quarter of the year. Volatile equity markets and the first of over a dozen payments to Caisse d'Amortissement de la Dette Sociale (CADES) were cited as reasons for the decline.

Publishing results for Q3, FRR revealed a slump in assets under management from €37bn in December last year to €34.7bn - with a 2.5% drop from the previous quarter.

The fund attributed the losses made to the fall in equity markets - with its European equity portfolio posting a negative return of nearly -18% - as well as to its first payment to the CADES, which is used to refinance the debt incurred to pay pensions.

Earlier this year IPE reported that due to reforms implemented in November 2010, the FRR would have to make 14 annual payments of €2.1bn to the CADES, with the last payment being made in 2024, when the fund will close down.

In spite of the losses recorded in Q3, FRR emphasised that the impact on the value of its net assets has been limited due to several factors.

First, its hedging assets - which represent more than 60% of the total size of its portfolio - have gained 5.3% over the last three months due to the fall in interest rates.

In addition, the fund, which has diversified its portfolio, has limited the losses made on the equity side to 10.4%, while European equities have lost 17.7% over the same period, according to data from the Eurostoxx 50 Index.

Finally, the FRR noted that its financing ratio has decreased mainly due to the fall in interest rates, reaching 132% as of 30 September, against 144% at the end of June.