France’s ERAFP tenders for €450m via six new mandates, diversifies to US equities

French SRI market rises by 29% in 2012.

ERAFP, the €14bn Paris-based French Public Service Additional Pension Scheme – a 100% SRI pension fund – is tendering for six new mandates valued at a total of €450m including three mid and large cap US equity briefs and three French small cap portfolios. The French fund, which manages retirement contributions for 4.6 million French civil servants, takes in annual contributions of €1.7bn making it one of the continent’s fastest growing funds. The three new US equity mid and large cap mandates indicate a broadening diversification of its assets outside of Europe. For the US mandates the French fund says it is looking for high conviction, long-term stock selection with no tracking error limitations. The selected managers will have the goal of outperforming the main US stock indices. ERAFP’s investments must all meet an investment charter that includes rule of law, human rights, social progress, democratic rights, environmental and governance standards. The fund says it expects all its asset managers to carry out an ESG assessment on each of the companies it holds using both ERAFP’s standards and internal or external research. It also expects its managers to engage with the investee
companies on ESG issues of concern and said that for this reason it will favour local expertise in its hires.The mandates for an indicative combined total of €300m have an investment performance horizon of three years based on an initial five-year contract that may be renewed for a further year over a rolling three-year period.
The three French small cap mandates on offer for a combined total of €150m will be awarded on broadly similar management criteria but with performance judged against France’s CAC Small index. ERAFP said the portfolios could also include some exposure to French micro or mid cap stocks.
Separately, the French SRI market grew by 29% during 2012 to reach €149bn, according to an update on asset growth by Novethic, the Paris-based media and research company. Novethic said the growth was down on 2011’s 69% rise, which was attributed to a large number of funds (notably cash funds) switching to become SRI compliant, and which also accounted for €7.4bn of 2012’s SRI growth. It said just over half (53%) of the 2012 growth was due to segregated mandates by French insurers being switched to SRI criteria. Institutional investors account for 72% of the French SRI market with the remaining 28% in retail funds, far above the 6% average retail SRI level across Europe. Novethic said there had been particularly strong growth in SRI employee savings funds, up by 30% year-on-year.