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Impact Investing

IPE special report May 2018

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PRO-BTP cornerstone of benefit structure

PRO-BTP is an organisation for the French construction industry, which runs the complementary system of social protection, insurance and pensions for over 3m people who belong to the BTP – ‘batiments et travaux publics’. The organisation was set up in 1993 by the social partners as a paritarian, non-profit making association that provides the human and technical resources for social protection.
The organisation covers 1.27m employees, including 157,000 managers, 240,000 white collar workers, technicians and foremen and 852,000 manual workers. The employees belong to some 460,000 companies throughout France, ranging from the largest construction firms to small and medium enterprises and 250,000 building craftsmen or ‘artisans’. The system also includes 1.85m pensioners and beneficiaries.
PRO-BTP originally comprised three organisations for different categories of workers: one for blue-collar workers (ouvriers), one for white-collar workers (etam) and one for managers (cadres). Each organisation had its own provident institutions and pension funds.
At the beginning of 1997 two of the three pension funds, CBTPR and the CNRO, the pension funds linked to the ARRCO complementary system merged to become a single fund, BTP-RETRAITE. At the end of last year the three provident institutions, CNPBTPIC, the CBTP and the CNPO were merged to become BTP Prévoyance.
BTP Prévoyance, like PRO-BTP, is a paritarian institution, and provides benefits in cases of invalidity, critical illness or death. It also provides health benefits and sick leave payment, and lump sums on retirement for workers. All these benefits are paid on top of any social security benefits.
The provident institution is the main business, with pensions forming a minor but important part of the activity at the present time. Currently pensions represent some 10% of PRO-BTP’s liabilities. PRO-BTP is part of the ARRCO and the AGIRC systems.
PRO-BTP set up its own asset management company, SAID Gestion, in 1990 to run the money of all the institutions of the group. The company was renamed PRO-BTP Finance this year and has assets of around e6bn. The assets of BTP Prévoyance account for 50% of this, the two insurance companies 30%, and the employee profit-sharing company and the two pension institutions each 10%.
The different activities of PRO-BTP require quite different investment strategies. The reserves for the pension institutions are very short-term, so it invests in the money market rather than the bond or equity markets. Contributions are paid by the companies at the end of each quarter and in two months the pensions are paid.
PRO-BTP Finance is run as a lean organisation with 20 investment staff: five in the front office, with three bond managers and two equity portfolio managers in the front office, four in the middle office risk management and seven in back office administration. To date, external equity funds have been used for the US and Japanese markets.
The company has taken the innovative step of creating six investment funds - three equity and three bond funds named after the group’s Paris headquarters in the rue de Regard. Our flagship equity fund, the E517m Regard Actions Euro, is invested in Euro-zone large caps. The E149m Regard Actions France invests principally in mid cap French companies and the E124m Regard Actions Diversifiées is invested in a wide range of global equities.
Of the bond funds, the E396m Regard Obligations invests in Euro-zone government bonds; the E101m Regard Rendement invests in investment grade corporate bonds and the E69m Regard Convertible invests in Eurozone convertible bonds.
An overall investment limit of 30% for equity investment applies, even though the code for social security allows a much higher rate. PRO-BTP Finance uses convertible bonds, which account for 10% of assets as a way of obtaining exposure to the equity market without taking the full risk. The investment income that PRO-BTP Finance earns has been useful to the group.
The merger and subsequent establishment of an internal asset management company has delivered a far better structure within which PRO-BTP is able to deliver improved services to its beneficiaries. The E600m invested directly into the pension fund element only represents 10% of the overall capital.

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