FRANCE - The Fonds de Reserve pour les Retraites, the French Pensions Reserve Fund, has shrunk by €500m amid negative returns in the most recent quarter.
The FRR said it posted a return of -2.3% in the second quarter due to the "strong and sudden" decline in global equities markets in May.
The result means the fund's size has fallen from €28.1bn at the end of the first quarter to €27.6bn at the end of June. It made a 4.3% return in the first quarter.
"Against a backdrop of higher volatility in the second quarter of 2006, the FRR's performance remained positive for the first six months," the fund said, disclosing at 1.9% return in the first half.
The FRR added that its global net performance since inception in two years ago is 17.9%, or 8.52% annualised.
"During the first six months of 2006, despite a strong and sudden downward correction in the equity markets as of the month of May, mandates invested in equities progressed overall, outperforming their benchmark indices," the FRR said.
"The decision made by the FRR to activate its bond mandates gradually in light of unacceptably low yields has allowed the fund to limit the impact to date of the deteriorating global bond market climate on its portfolio against a backdrop of steadily rising long-term interest rates over the last six months."
Last month the fund said it planned to put up to 10% of its assets into alternatives.