French pension makes foray in commercial RE

An €8.5bn French civil service pension fund will reportedly invest €100m per year in commercial real estate in France, in an attempt to diversify the fund.

An €8.5 billion ($11.3 billion; £7.4 billion) French civil service pension fund will reportedly invest €100 million per year in French commercial real estate, underscoring a wide pension industry trend of diversification to protect against volatility. The commercial real estate investments will be the first time the pension has invested in the sector, according to Reuters.

The fund, Retraite Additionnelle de la Fonction Publique, may invest up to 6.5 percent of its net annual pension contributions of €1.7 billion in property, according to chief investment officer Philippe Desfosses. The scheme is also planning on increasing investments in equities to 25 percent of pension contributions, up from the current 17 percent. The majority of its current equity investments are reportedly European.

Desfosses said real estate provided the fund with steady returns as well as protection against inflation. The pension, set up in 2005, provides civil servants with a pension beyond the state scheme, according to the report.

The real estate allocation still has to be approved by the French cabinet, with the fund’s first investments in the sector expected next January, Desfosses told Reuters.

Desfosses also stated that the fund’s investment strategy is fixed annually, but that he is planning on asking the pension’s trustees to allow the strategy to be fixed every three years to allow for a longer-term strategy.

The CIO and his team are reportedly preparing to vet new equity managers, as the existing four equities mandates of €1.2 billion expire next year. Up to seven new managers could be hired to manage the equities portfolio, with a strategy of growing the asset class to an estimated €3 billion over the next six years.