The Fonds des Reserve pour les Retraites, Paris, over the next 18 months will make its first investments in emerging markets, invest up to 10% of assets in alternatives, increase its allocation to North American and Asian equities, and cut its exposure to bonds as part of a new strategic asset allocation unveiled today.
The €27.7 billion ($35.67 billion) pension reserve fund could put €816 million to €830 million in emerging markets. Fund officials will undertake a manager search in the next few months, after finalizing a new risk budget.
The alternatives exposure will include real estate, commodity indexes, public infrastructure and private equity. The FRR will have to get permission from the French government to amend and possibly speed up competitive tendering procedures for these asset classes, said Christophe Aubin, head of investment strategy and risk budgeting at the plan.
The plan's North American equities will be raised two to three percentage points, to about 23% of the equity portfolio, while the Asian equities allocation will be raised four to five percentage points to about 10% of the equity portfolio, said Mr. Aubin.
It will cut its eurozone bond holdings by 16 percentage points to 21% of total assets and raise its exposure to bonds outside the eurozone by two percentage points to 9% of assets.
No details were available on any money manager searches.
The new target asset allocation - 60% equities, 30% bonds and 10% alternatives - should be fully implemented by early 2008 and is expected to generate a return of 6.3%, he said. The previous asset allocation was 55% equities and 45% bonds with a target return of 6%.