RI stalwart France’s FRR tenders for €800m in small and mid cap equities mandates

Fund was a founding signatory of the UNPRI.

French state pension fund the €36.6bn Fonds de Réserve pour les Retraites (FRR), one of Europe’s biggest responsible investors, has gone to market for new small and mid cap equity mandates in France and Europe worth €800m. The FRR, a founding signatory of the UN Principles on Responsible Investment (UNPRI), says the European small caps allocation could be worth an estimated €500m and be awarded in up to five separate mandates. Prospective managers will be benchmarked against the FTSE Developed Europe Small Cap index, or a suitable equivalent, with the objective of outperforming the index over a compete market cycle of three rolling years with a maximum tracking error of 10% per annum. The sector and country weights for the mandate/s will not be restricted and the contracts for managers will be drawn up for five years. The separate French small and mid caps allocation has been given an approximate value of €300m and could also be divvied up into a maximum of five mandates. The FRR said the investment universe for the mandate/s would consist of an index composed of French small and mid cap companies in France aswell as companies where the headquarters is in France. The investment objective is to outperform the FTSE All Cap France over three years with no limit on sector deviation. The date for final manager questions on the mandates is April 26 and May 17 for final applications. The fund is also tendering for a transition manager for the mandates to be hired by May 13. Investment returns at the FRR jumped to 10.5% last year, boosting assets under management by €1.5bn. Under pension reforms introduced in 2010, FRR began in 2011 to pay about €2bn per annum into CADES (Caisse d’Amortissement de la Dette Sociale), the state agency charged with funding France’s social security debt, nine years earlier than planned. FRR no longer receives any asset inflows from the state. The fund will be fully wound up by 2024. At the end of 2012, FRR selected three asset managers – AXA Investment Managers Paris, Financière de l’Echiquier and Kempen Capital Management – to run €200m in actively managed sustainable growth equity mandates as part of its ESG strategy.