FRANCE – The Fonds de Réserve pour les Retraites, the French Pensions Reserve Fund, has issued a tender for its first ever private equity programme - €1.5bn in four lots, or just under 6% of its total portfolio.
The move is the second large European pension fund allocationto private equity in as many days, following ABP and PGGM's decision to allot €11bn to AlpInvest yesterday.
The €24.8bn FRR says the idea is to diversify its portfolio to cut risk as well as make a contribution to the corporate sector and the wider economy. The move will take it to the “top tier” of French institutional investors in private equity.
It admits the total amount allocated is ambitious in the current market environment.
It has opted for a “strong tilt towards Europe”, planning to commit around two-thirds of its program to investments in this region. The North American component should represent about 30%, with 5% free to take opportunities as they arise. Real estate is excluded for now.
“From a financial standpoint, private equity contributes to enhanced efficiency in portfolios constructed to yield returns over a long-term horizon,” the FRR stated – adding that over the longer term the asset class has historically outperformed listed asset classes.
The FRR added that intends to gain exposure to the development of new technology business in the start-up phase and finance small- to mid-sized business.
“This programme represents FRR’s first foray into alternative investments and is intended to be followed by new allocations which would either supplement existing ones or be dedicated to specific segments or funding mechanisms.”
The investment horizon of the program has been set at three to five years, with a commitment phase to new private equity vehicles spread over the period from 2006 to 2010.
The fund is seeking fund-of-funds managers, with the allocation broken down into several discretionary management 12-year mandates (one or two maximum per lot).
The deadline for responses is February 9.
The lots are as follows:
Lot 1. European diversified portfolio (€450m)
Lot 2. European small and mid cap (€250m)
Lot 3. North American diversified (€450m)
Lot 4. International diversified portfolio of secondary positions (at least €150m)