David and Goliath

Judge’s comment: “These two funds may be poles apart in terms of size and remit, but both make excellent use of the respective resources at their disposal.”

FRR, the French national pensions reserve fund was created in 2001 to help relieve the strain on France’s first pillar pension system from 2020 onwards. It began life with an initial cash injection, followed by more government contributions until 2004 when it began to invest. Until 2010, with no explicit liabilities and an investment horizon expected to run from 2020 to 2040, performance-seeking assets dominated the asset allocation. In 2008, however, FRR began to model hypothetical liabilities that it indexed to inflation.

In 2010, FRR’s mission changed following a reform to address the public pension deficit. It now has an explicit nominal liability consisting of yearly €2.1bn payments from 2011 to 2024, an additional one-off financial pay-out proportional to its performance in 2020, which is currently worth €4.7bn, and no more inward flowing contributions. As a consequence, the appropriate investment allocation changed dramatically with the adoption of a two-fold mission to hedge liabilities and maximise the surplus it is expected to enjoy in 2024. FRR addresses these two objectives with an LDI framework based on a liability hedging portfolio and a strategy to generate returns based on a performance-seeking portfolio.

Additionally, the asset allocation framework aims to achieve appropriate levels of risk diversification while allowing for flexibility through tactical allocations to benefit from or protect against market conditions. FRR is also keen to be a major player in financing the private economy.

FRR outsources all  investments to external managers. With a mix of active and passive management, FRR currently monitors about 58 mandates and 40 funds covering all regions.

2014 Essentials



Founded in 2004

Defined benefit sovereign reserve fund

Assets: €37.2bn


  • one year: 8.7%
  • three years: 8.1%
  • five years: 3.9%
  • ten years: 3.9%

Quick facts

  • National reserve fund to supplement pay-as-you-go system until 2024
  • Outsourced investment framework supporting 58 mandates and 40 funds


NLB Nov Penziski Fond (NLB NPF) is a pension management company running one mandatory first pillar and one voluntary second pillar pension fund for the national pension system in Macedonia introduced in 2005. The scheme is relatively small with €277m under management at the end of June 2015. But that has not prevented the scheme from developing an innovative and complex investment strategy.

NLB NPF’s approach is based on a set of assumptions about inflation and the expected return and level of volatility of certain asset classes. These are reviewed each year to ensure the strategic asset allocation remains appropriate. For any tactical adjustments, it uses a mix of top down and bottom up research depending on the asset class, with the bottom up approach applied mainly to its equity portfolios. It uses exchange traded funds to gain exposure and balance the portfolio by region and sector.

The development of risk management is an area where NLB NPF has made most progress in the past few years. The appointment of a dedicated risk manager has both enhanced and consolidated the quality of risk identification, measurement, monitoring and control. All major investment risk factors are monitored daily, while operational risk includes contingency plans covering extreme eventualities.

ESG constitutes an increasingly important area in the fund’s stock selection model, which it is currently rebuilding to ensure it identifies companies with sustainable business models and long-term growth prospects, while minimising the impact of short-term results or occurrences.

As a small fund in a growing market, human capital is NLB NPF’s most important asset and acquiring the best talent for its teams and providing continuous training is vital to the scheme’s success.

2014 Essentials

NLB Penziski Fond


Founded in 2006

Defined contribution sovereign reserve fund


  • active: 185,322
  • deferred: 298

Assets: €249m


  • one year: 6.32%
  • three years: 7.6%
  • five years: 6.58%

Quick facts:

  • Efficient execution using ETFs
  • Appointment of dedicated risk manager


  • Pension Reserve Fund of the Republic of Srpska


  • David Cienfuegos
  • Tim Giles
  • Anton van Nunen
  • Bart Heenk