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France’s €38bn Fonds de Réserve pour les Retraites (FRR), is tendering for one of the biggest rosters of bond managers in recent times with a total of up to €8.5bn in assets being proposed across 11 different mandates to funds houses running euro- and US dollar-denominated credits.
The mandates, which could represent an average of €770m per new manager, represent the increasing shift of the fund’s assets towards fixed income as it steadily moves towards its eventual wind up in 2024.
The FRR, created as a pensions buffer fund for the French retirement system, is one of the world’s highest profile responsible investors with a senior five-member responsible investment committee.
It was a founding signatory of the UN-supported Principles for Responsible Investment (PRI) and is a signatory to the UN Global Compact. Its Executive Director is Olivier Rousseau, a former investment banker with experience in both equities and debt.
The new mandate tenders come in two baskets. The first represents a maximum of €5.5bn in assets covering six actively managed mandates for euro-denominated corporate bonds and other credit investment grade debt securities down to Bb-, with a possibility to invest to an agreed level in Sterling denominated bonds also.The second represents five actively managed US dollar-denominated corporate bond and other investment grade securities portfolios worth a total of up to €3bn.
The durations for all the mandates are four years with the possibility of renewal for an extra year.
In 2011, the FRR began paying 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 plan is that the fund will be fully wound up by 2024. The fund had originally only been scheduled to start paying down its assets in 2020.
The FRR uses EIRIS, the ESG research firm to scrutinise its investments on issues liking determining portfolio company involvement in UN-banned munitions such as cluster bombs and anti-personnel mines as well as biological and chemical weapons. EIRIS also assesses the pension fund’s stock and corporate bond holdings against governance criteria. Engagement with companies on ESG risks is carried out by FRR’s fund managers.
In September last year, FRR said it was allocating €1bn in assets to a low carbon tracker fund run by Amundi, the French fund manager, based on the MSCI Global Low Carbon Leaders indices.