France’s ERAFP tenders for €1.25bn in US large- and mid-cap equities

Fund has a 100% SRI strategy based on ESG best-in-class and engagement

ERAFP, the €30bn French public service additional pension scheme, a 100% SRI investor, is in the market for managers to run combined US mid and large cap equity investments worth €1.25bn across three active mandates and four stand-by contracts. 

The mandate tender is being made in two buckets.  

One is for four mandates to manage US large-cap equities  – two active and two “stand-by” mandates – worth a total of approximately €1.1bn.

The other is for three mandates to manage US mid-cap equities (one active mandate and two "stand-by” mandates) and will be in the order of €150m.

ERAFP said managers will be hired to develop a non-benchmarked, conviction-driven management approach for a US equity portfolio and to outperform over the long term the Russell Mid Cap index for the mid-cap mandates and the MSCI USA index for the large caps. 

The mandates are for an initial term of five years. ERAFP said it may renew the contracts for two successive one-year periods, giving a maximum possible term of seven years.

ERAFP is one of the world’s largest public pension funds in terms of member numbers, with over 4.5m beneficiaries, 45,000 employers and nearly €1.8bn in annual contributions, making it one of the fastest growing institutional asset pots globally, all of which is outsourced to third party managers.

The French pension giant said portfolio composition, to be determined by the investment firms, must also comply with its SRI framework which requires managers to analyse companies’ ESG scores to implement a ‘best-in-class’ portfolio. 

Managers should also identify investment topics likely to be subject to shareholder engagement, which the fund supports.

The fund managers’ investment analysis and reporting must also be consistent with ERAFP’s commitments to monitor the impact of its investments.

Managers have to submit their tender documents both in French and English by May 4 at midday. The contact at the fund is Olivier Bonnet, Head of Asset Manager Selection:

ERAFP’s CEO is former airport executive turned government official, Laurent Galzy, who succeeded Philippe Desfossés at the end of 2018.

Earlier this year ERAFP joined the United Nations’ Net-Zero Asset Owner Alliance – taking the initiative’s assets under management to more than $4.5trn (€4trn). Signatories to the Alliance commit to achieving a carbon-neutral investment portfolio by 2050.