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French reserve fund loses a quarter

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  • French reserve fund loses a quarter

FRANCE - The Fonds de reserve pour les retraites (FRR) has revealed its assets decline by 24.8% during 2008.

FRR's assets were valued at €27.7bn by the end of last year, down from €33bn.

The fund added its annualised performance since its inception in June 2004 currently stands at 0.3%.

The fund had reported a return of 8.8% in 2007, though FRR said, like most other pension funds it had suffered in 2008 from the global crisis in the capital markets.

FRR stressed these results do not reflect any losses related to securitised vehicles, structured products or hedge funds, as it did not invest in these vehicles.

"The losses are attributable to the strategic asset allocation, which led to a predominance of equity investments in the portfolio (60%), made in 2003 and in 2006, consistent with the usual level of exposure to the markets for a very long-term investor with no liquidity constraint prior to 2020 and therefore able to benefit from the outperformance of equities over a sufficiently long time frame," said the pension fund in a statement today.

The fund said in light of the turn for the worse the credit crisis took in late September, and following the guidelines set down in October, the exposure of the FRR's portfolio to equities was substantially cut back to 49% from 64.5% at year-end 2007.

Correlatively, the percentage of assets held in government bonds (14%, versus 1.2% at the end of 2007) and invested in corporate bonds (36%, versus 33.5%) was increased.

"The supervisory board unanimously considered that, in light of the current market environment, this conservative management strategy had to be maintained for the foreseeable future," said the fund.

The task of reviewing the strategic asset allocation has begun and should be completed by May 2009.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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