FRANCE - The French pension reserve fund (FRR) returned 11.1% in 2006, down from 12.4% in 2005, on its assets, which rose by €4.5bn to €31.1bn.

The 62.1% equity investments returned 16.5% bringing the annualised performance since inception to 19.7%.

Bonds brought negative returns of -2.1% for the fund with an annualised performance of 4.8%.  "The performance of bond investments was impacted in 2006 by rising interest rates, particularly European," the FRR noted in a statement adding that the annualised bond performance was still positive.

In December, the FRR had awarded a €150m private equity mandate to AXA Private Equity Europe. In its estimated results press release it announced to further diversify the portfolio by looking at real estate, commodities and infrastructure.

Despite the poor bond performance the fund will continue to increase its exposure to bonds from currently 26.4% to 30% to reach its strategic target set out in May 2006. At the same time equity exposure will decrease from 62.1% to 60% over the next years.