The French Pension Reserve Fund (FRR) delivered a net return of 9.1 per cent in 2025, increasing its assets to €20.7bn despite making an annual payment of €1.45bn to Cades.

The fund’s annual report showed that its assets increased from €20.4bn at the end of 2024, rising by €315m over the year, or by almost €1.8bn once the payment to Cades was stripped out.

FRR said its annualised performance since the end of 2010, when its current liability-driven management model was introduced, now stands at 4.4 per cent.

The fund also claimed it had created €15.6bn of additional value compared with an investment at the average cost of French state debt since the end of 2010, including €1.5bn in 2025.

Since its creation, it has now returned all of the sums originally allocated to it - around €32bn - as well as an additional €3.6bn.

The fund added it had generated €24.3bn of gross value beyond the endowments received since inception.

FRR’s 2025 performance was supported by a higher allocation to performance assets, after the fund extended its investment horizon beyond 2033.

In June 2025, the supervisory board adopted a strategic allocation including 46 per cent in unhedged equities, up 4.5 percentage points from the 2024 allocation.

The fund noted this formed part of a broader increase in unhedged equities over the past two years, designed to improve the projected long-term median asset value without a notable increase in long-term risk.

As a result, by the end of 2025, unhedged equities represented 45.4 per cent of the portfolio, intermediate-risk assets 38 per cent, and hedging assets 16.5 per cent.

FRR confirmed that performance assets, including equities and intermediate-risk assets, had risen by 163.1 per cent since 2010, compared with 27.6 per cent for hedging assets.

The fund argued that its long-term performance provided a practical example of how collectively funded pension reserves can generate returns above the cost of public debt while operating within a controlled risk framework.

Meanwhile, FRR continued to increase its support for the French and European economies in 2025, investing €6.7bn in the French economy across the year.

The annual report showed that 32 per cent of FRR’s assets were invested in France, while 80 per cent of its unlisted assets were invested in the country.

The fund also made €500m of new commitments to unlisted assets during the year, including €260m in infrastructure.

It launched two tenders for dedicated unlisted asset funds, targeting around €1bn in total across private equity fund-of-funds and unitranche private debt, with a primary focus on French SMEs and mid-sized companies.

FRR said the investments are intended to support business growth, job creation and the development of the French economy, while selecting asset managers with ambitious and measurable environmental, social and governance (ESG) criteria.

Indeed, the fund also strengthened its responsible investment strategy during the year, according to its sustainability report.

As part of its 2024-2028 sustainability plan, FRR created a dedicated responsible investment strategy department within its financial division in September 2025.

It also tightened its climate-exclusion policy, particularly regarding thermal coal and unconventional fossil fuels.

Under the revised approach, FRR excludes companies deriving more than 1 per cent of turnover from thermal coal, as well as companies deriving more than 10 per cent of turnover from unconventional fossil fuels.

The fund also set out a planned full exit from thermal coal, with exclusions from the first euro of turnover applying from 2030 for companies headquartered in OECD countries and from 2040 for companies outside the OECD.

FRR stated it had reduced the carbon footprint of its equity portfolios by 50 per cent between 2019 and 2025, against a 60 per cent reduction target for 2029.

The sustainability report also showed it had €592m invested in green and sustainable bonds at the end of 2025, including €67m in sovereign green and sustainable bonds.

In addition, €686m was invested in infrastructure contributing to the energy transition, while infrastructure investments linked to ecological and energy transition accounted for almost 90 per cent of assets in that asset class.

Overall, FRR’s listed equity portfolio had 0.99 per cent of revenues exposed to fossil fuels, compared with 1.71 per cent for its benchmark, while its corporate bond portfolio had 1.07 per cent of revenues exposed to fossil fuels, compared with 3.32 per cent for the benchmark.

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