Mandate roundup: FRR, Vanguard, Alliance Bernstein, BNP Paribas, Amundi, KPMG

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  • Mandate roundup: FRR, Vanguard, Alliance Bernstein, BNP Paribas, Amundi, KPMG

EUROPE - France's Fond de Réserve des Retraites (FRR) - which has more than €35.6bn of assets, against €24.7bn of liabilities at the end of June - has awarded two new contracts for the management of its equities portfolio as part of its new liability-driven investment (LDI) strategy.

The fund has awarded a contract to Vanguard Asset Management and Alliance Bernstein to manage €1bn of passive, market-cap weighted, developed market equities.
The FRR has also selected BNP Paribas Asset Management and Amundi to manage another €1bn of non-market cap weighted passive equities.

The two mandates will be awarded for a period of four years, renewable for one year thereafter.

Earlier this year, the fund introduced a new LDI strategy as a result of changes in the pension regulation recently implemented in France.

The recent pension reform obliged the FRR to meet its obligation to pay €2.1bn each year to the Caisse d'Amortissement de la Dette Sociale (CADES) until 2024 - when the fund is expected to close down.

As part of its newly implemented LDI strategy, the fund had to use more alternative indexation and take on much more emerging market risk in its performance portfolio.

In a statement, the fund said: "From this perspective, the chosen LDI management approach rests on broad coverage of its liabilities employing assets designed for this purpose (hedging portfolio) and on dynamic management of a performance portfolio."

Meanwhile, the fund also published its interim results, in which it reports a funding ratio of 144%.

The hedging portfolio represents 59.6% of total assets, while the performance portfolio accounts for 40.4%, the FRR said.

Its return was 3% between 13 December 2010 - which is the reference date for the new strategic allocation - and 30 June 2011.

In other news, Lloyd's Register Superannuation Fund Association, the defined benefit scheme for the London-based shipping registry company, has appointed KPMG as investment adviser.

As part of the new appointment, the consultancy will work with the scheme's investment committee and offer advice, specifically regarding its liabilities.

The company added: "This will begin with a comprehensive review of the existing investment arrangements. Key areas of focus will be diversification, as well as the potential use of liability-driven investment."

Neil Dunford, chairman of the trustees at the £650m fund, said he was "impressed" by the consultancy's understanding of its requirements, while head of KPMG's investment advisory practice Patrick McCoy said his company would work specifically with the scheme to improve its funding position.

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