FRANCE - FRR, the French national pension fund, has completed its strategic asset allocation review and effectively split equities and bonds holdings as well as introduce new standards on the level of returns and volatility set.

A statement from the executive board confirms the supervisory board voted earlier this week to split to in future incorporate two new elements into its processes which will impose an obligation to return the real value of contributions between 2020 and 2040 received since inception, as well as implement "more dynamic management of the reference portfolio" to better handle short-term risks and market volatility, which are still prevalent.

Under the new regime, the asset allocation will be split as 45% equities, 25% fixed-rate bonds, 20% indexed bonds, 5% real estate and 5% in commodities, though there will be more flexibility around the target allocations of the "performance" assets to vary between 40% and 60% at least until the next review, which will now be conducted annually.

Earlier asset allocation changes meant equity holdings were reduced in the midst of market turbulence from 60% to 49%, while fixed income amounted to 36.5% of assets, commodities were worth 3.5% of the portfolio and money market assets made up 12.3% of the fund.

Details of its general investment policy guidelines state the reference portfolio factors in the occurrence of extreme scenarios and, for 95% of the time, "the basic risk of not being able to honor the liability obligations indicated".

However, discussions about the impact of environmental issues on its investment policy and the long-term allocation will continue.

Thanks to improvements in returns within the last month alone, Fonds de Reserve pour les Retraites (FRR) now has assets under management of €28.9bn, compared with €27.7bn at the end of the first quarter, and has an annualised return since inception (in June 2004) of 1%. This figure had slipped to -1.2% in the first three months of this year.

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