FRANCE – The €19.2bn French reserve fund, Fonds de Réserve pour les Retraites, says it is currently holding off from fixed income investments because of low yields.

A spokeswoman for the fund said FRR was adjusting to market conditions, which are making bonds relatively expensive. However, she added that the FRR had already invested 50% of its assets, chiefly in equities.

The FRR was set up in 1999 to provide future support for the pay-as-you-go state pension system through financial investments. Its resources cannot be used until 2020.

The spokeswoman also told IPE that the FRR expects funding levels to have reached between €24-25bn by the end of this year.

The projection includes a €3.1bn cash injection from a compensatory adjustment by France’s electricity and gas enterprises, EDF and GDF.

The sum amounts to 40% of the €7.7bn to be paid as a compensatory adjustment by EDF and GDF on the integration of their pension obligations into the state old-age fund, the Caisse Nationale d’Assurance Vieillesse (CNAV).

The FRR announced last week that it was also looking for a specialised consultant to assist with the manager selection for private equity mandates. The fund’s allocation to the asset class will be in the region of “ several hundreds of millions of euro”.

The spokeswoman declined to comment on whether Mercer Investment Consulting, the adviser involved in 27 manager appointments last year, would pitch for the private equity consultancy.

FRR will also allocate money to socially responsible investments during the year and will consider allocations to hedge funds and real estate later.

Francis Mayer, chairman of FRR’s executive board, said last week that hedge funds and real estate were not in the fund’s “current investment universe”.