France’s €38bn FRR names managers for mammoth €8.5bn bond manager search

Fixed income shift is part of fund’s wind-up strategy.

France’s €38bn Fonds de Réserve pour les Retraites (FRR), has announced the winning funds houses for one of the biggest rosters of bond mandates in recent times with a total of up to €8.5bn in assets outsourced across 11 different briefs to managers running euro- and US dollar-denominated credits.
RI reported the search when it was announced in January 2015: Link to story
The first mandate bucket worth €5.5bn for euro denominated, credit grade corporate bonds will be divvied out to six fund managers: Allianz Global Investors, AXA Investment Managers, HSBC Global Asset Management, Insight Investment Management, Kempen Capital Management and La Banque Postale Asset Management.
In the second bucket of the RFP, for $3bn worth of US dollar denominated, credit grade corporate bond mandates, the money will be split between five houses: AXA Investment Managers, BFT Investment Managers, BlackRock Investment Management, Morgan Stanley Investment Management and Wells Fargo Securities International.
All the mandates are granted for five years with a further one-year extension option.The mandates represent the shift of FRR’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.
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 Vigeo EIRIS, the ESG research firm, to scrutinise its investments for portfolio company involvement in UN-banned munitions such as cluster bombs and anti-personnel mines as well as biological and chemical weapons. It also assesses the pension fund’s stock and corporate bond holdings against corporate governance criteria. In addition, FRR’s fund managers carry out engagement with portfolio companies on ESG risks.