France’s €36.3bn national pension reserve fund has been granted permission to invest more in investment funds, a change an executive director at the fund said would make it easier to implement its new allocation to illiquid assets.  

A decree published on Wednesday allows the Fonds de Réserve pour les Retraites (FRR) to invest up to 20% of its assets in investment funds (Ucits); the previous limit was 15%.

Beyond this, the asset owner is required to launch a public procurement process.

FRR has been seeking to have the rule relaxed for some time, IPE understands, and formally made the request at the end of October last year.

Yves Chevalier, executive director at FRR, said the new rule had no implications for the reserve fund’s asset allocation but simply facilitated its implementation.

“It means we can, without launching calls for tenders, increase our investment in investment funds, such as infrastructure or real estate funds,” he told IPE.

FRR is currently prioritising a move into illiquid assets, after the government last year allowed it to invest €2bn in French assets including property and infrastructure.

“It was necessary to enable us to implement our €2bn programme,” said Chevalier of this week’s decree.

The bulk of the new allocation – €1.4bn – will be invested under mandates that will be put to tender, according to Chevalier.

FRR has already launched a €600m private debt tender and will later this year seek bids for some €800m in private equity management mandates.

Because it has earmarked a relatively small amount to invest in asset classes such as infrastructure, however, FRR does not want to put this out to tender, said Chevalier.

The same goes for real estate, to which it has allocated no more than €300m.

To be able to meet its targeted allocations to domestic infrastructure and property, however, FRR needed to be able to increase the amount to invest via investment funds.

As such, it is taking its overall allocation to illiquids to €2.2bn, with the additional €200m set aside for investment in investment funds.

“To be able to invest €2bn in France, we’re going to have to do €2.2bn,” said Chevalier, “because, when it comes to infrastructure, you don’t find funds exclusively focused on France. Instead, they might be around 50% in France but also with exposure to other European countries such as the UK or Germany.”

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