In 1999 France established a reserve fund for retirement under the management of the FSV, an organisation designed to finance pension rights attributed without contributions.
Last January the reserve fund acquired independent status, although how this fund will be managed in future is still uncertain and is linked to political issues.
According to the government the fund should accumulate e150bn by 2020 to help finance the basic social security schemes between 2020 and 2040. The fund is not intended to be a long-term solution for the pay-as-you-go system but more a temporary one to face medium-term financial shortages.
With general elections coming up, the government has not yet made public full details of the structure of the fund, and the general opinion is that we there will be no further developments in this area until a new government is established. Although last year’s financial projections for French social security were intended to include details on investment policy and management of the assets of the reserve funds, these were withdrawn at the last minute for technical reasons.
However, in July, as a part of a law that gave the reserve fund the status of public administrative entity, some recommendations were made for the fund structure. These included that the fund should have a supervisory board formed by members of parliament, trade unions, employer representatives and qualified experts, to set overall investment guidelines that take into account objectives, timeframes and risk control. A board of directors should also be established to carry out the investment decisions of the supervisory board. Regarding investment strategy, the recommendations also say that the financial management of the fund will be awarded after a tender to several managers, and authorises the fund to invest in equity. The way social, ethical and environmental criteria are taken into account in the investment process should be included in the annual report of the fund.
At a time of important recent developments in the outsourcing of assets in social security reserve funds in countries such as Ireland or Portugal, the asset management community is wondering what will finally happen with the French reserve fund. Without doubt the final decision will attract interest from asset managers in France and further afield.

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