FRANCE - The Fonds de reserve pour les retraites' funding ratio fell to 132%, dropping 11 percentage points from June's value due to decreasing interest rates on 10-year bonds.
In its third quarter results, the reserve fund said total assets fell to €34.7bn ($48bn), down from €37bn at the end of last year. However, only a mere €200m of the decline was due to investment losses. At the end of June, assets totalled €37.4bn.
The fund paid €2.1bn in April 2011 to Caisse d'amortissement de la dette sociale (CADES), the agency in charge of amortising the country's social security debt, as required by the French government.
In 2010, the government ordered FRR to pay €2.1bn per year to CADES through 2024, after which time the fund will wind down. As a result, the fund said in March it had instituted a liability driven investing strategy. (Global Pensions; 10 March 2011)
FRR said the reduced funding ratio makes it "less comfortable" to meet its liabilities but the 132% ratio "still provides a high degree of certainty".
FRR said during the quarter it gained 5.3% in its hedging assets, or bonds, which represent 63% of the portfolio and lost 10.4% in equities. European equity markets were down 17.7% in the same time period.
The fund also said it returned -1% since the beginning of the year, and is up 2.6% since inception in June 2004.
The plunge has also reduced funding ratios in other European pension funds such as Pensioenfonds Zorg & Welzijn (PFZW) down to 91% and Stichting Pensioenfonds ABP's down to 90%. (Global Pensions: 20 October 2011)
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