FRANCE - France’s Fond de Réserve des Retraites (FRR) saw its net assets take a hit in 2011, falling to €35.1bn against €37bn in 2010, just a year after it introduced a liability-driven investment strategy as a result of changes in the country’s pensions regulation.

Following the reform in November 2010, the FRR was ordered to pay €2.1bn a year to the Caisse d’Amortissement de la Dette Sociale (CADES) until 2024.

In its annual results for 2011, the FRR said its net assets had fallen by more than €200m excluding its payment to CADES.

Although the FRR’s performance portfolio lost 5.9% over the period, its hedging assets performed relatively well, it said.

The FRR attributed the losses in its performance portfolio to the 14.5% drop recorded by European equities, “due in particular” to the resilience of US equities (+2%), US corporate bonds (+9%), debt instruments of emerging countries (+3.4%) and commodities (+1%).

It also said the 4.5% increase for hedged assets had been largely due to the fall in interest rates of issuers seen as safe havens, such as Germany and the US.

The fund’s financing ratio reached 136.5%, slightly lower than its level at the beginning of the year, when it stood at 139.25%.

The FRR attributed this to the fact its asset value had increased at the same time as the value of liabilities had increased by even more due to a drop in its discounting rate - 10-year French Treasury bonds fell from 3.36% to 3.15%.

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