FRANCE - Fonds de Réserve pour les Retraites (FRR), the French national pension reserve, saw its assets recover to €33.3bn by the end of 2009, thanks to a 15% gain led by the equities rally.

Fixed income moved back towards the fund’s strategic asset allocation last year and returned a steady 3.4% on its 37% holding (9.5% was in inflation-linked bonds). But it was equities which delivered the best return and contributed 11.3% from a 46.9% holding in equities, alongside a 0.5% gain from commodities.

At least 20bps was paid by FRR in investment and administrative fees, according to results.

The board said in its preliminary report that “the results in 2009 to the relevance of choices made in June 2009”.

FRR changed its allocation last year to carry approximately 55% in performance assets of equities, real estate and commodities, and 45% in fixed income assets which also contained inflation-linked bonds and cash awaiting investment.

The end-of-year asset allocation was split as 46.9% equities, 1.6% real estate and 3.9% commodities against weighted allocations of 45% equities, 5% real estate and 5% commodities. The optimum fixed income portfolio will in future compromise 25% fixed income, and 20% inflation-linked bonds.

“These choices were based on the conviction that a long-term investor with no liquidity constraints before 2020 could benefit over time from the expected outperformance in asset classes that show volatility in the short-term, particularly equities,” said the FRR board.

“As is normal after a crisis of secular magnitude, the annualised performance of the fund remain below the return that is expected over the long-term,” continued FRR. “The Board remains very attentive to the economic and financial environment, which is volatile and marked by the consequences of the crisis for the real economy.”

It said the supervisory board has also adjusted the proxy voting guidelines it gives to assets managers who exercise voting rights on their behalf.

In particular, FRR has asked more attention be paid to the representation of women when board of director elections arise, and called on managers to seek greater transparency concerning remuneration and compensation systems.

The focus on compensation requires managers to investigate the granting of stock options and free shares allotments and seek performance conditions for company executives where possible. Specific emphasis has also been placed on the benefits policies of financial services companies, said FRR.

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