The importance of control ratios

Régis Pinguet heads the fund selection team at French insurance group CNP Assurances, overseeing €50bn in assets.

CNP Assurances was founded as a public financial institution in 1959. It became a private sector company in 1992, and listed on the Paris stock exchange in 1998.

A team of three led by Régis Pinguet oversees fund selection for the firm’s portfolio managers. Currently, the buy list tallies some 380 funds from around 100 asset management companies.

After running both quantitative and qualitative analysis, all investments suggestions are submitted to an investment committee attended by the company’s head of Investments, head of Risk as well as either its CEO or CFO.

Meanwhile, CNP Assurances’ portfolio managers seek meetings at least twice a year with the managers of the funds in which they invest.

Investments are conducted as part of strategies managing between €500m and €3bn in assets. A few exceptions include European convertibles funds whose size is limited and where AUM is below €500m.

“The size of a fund forms an important criteria since we need to respect control ratios. The average investment ticket of CNP Assurances in a fund is between €200m and €300m.

“Those levels are very useful for us and the manager. If our control ratio stands at a too high level in a strategy, the fund will face a major risk in the event we exit it.

“Control ratios depend on the asset classes we invest in. If the asset class is liquid, we can go up to 20%. If not, our limit stands between 10% and 15%. We do not exceed 10% in certain cases,” Pinguet says.

Style, moves in the strategy, changes in the team, and the fund’s volatility remain among the key criteria assessed by the team.

“We are prudential with the risk analysis conducted for smaller sized managers. The chief compliance officer then often reports to the company’s CEO, who is himself a portfolio manager.

“It would be preferable that independent and external firms perform the analysis,” Pinguet adds.

He stresses that the topic of Solvency Capital Requirement slips ever more into discussions with fixed income managers.

Challenges include the relationship between yield and cost of capital.

Also, asset managers are being asked by CNP Assurances’ fund selection team if they have signed the United Nations supported Principles for Responsible Investment: Pinguet points out it forms a valuable asset if they have.

“Even though signing PRI is not yet an obligation, this question becomes systematic, as CNP Assurances signed them and delivers a specific report in order for the asset managers to be compliant.

“Not being able to provide us specific data required could compromise further investments in the funds of these asset management companies,” he argues.

Turnover is low on CNP Assurances’ buy list, with some 10 funds removed in 2015. The fund selection unit is currently exiting the investment grade European debt universe.

“If funds encounter capital losses, we will have to fund them and that is a risk we want to avoid. We then prefer investing in direct lines on the IG European bond segment,” Pinguet explains.

He believes the purchase of corporate debt by the European Central Bank will have an impact on the European corporate bond market.

“Currently, bond managers can easily sell but buying debt remains harder. It is the upside-down liquidity issue. If the trend reverses, bond managers would therefore not be able to sell.

“The liquidity issue is also real on the equity segment. We see massive buybacks from corporates and in some places, mostly in the US, and equity managers cannot always invest like they intend to do,” Pinguet says.

Another move considered by CNP Assurances’ fund selection unit is returning to pick a few funds on the US high yield fixed income segment, an asset class in which the firm has disinvested since 2015.

“Our core investments have been in European equities. We have had a ride for value funds in recent times as we considered value style would top markets again at a fast pace. That has not happened yet,” Pinguet says.

Regarding absolute return funds, like many selectors, Pinguet concludes that performances were not generally in line with the team’s expectations.

“We had picked a few absolute return funds in the current low rate environment. But performance was not what we expected; moreover capital protection is not guaranteed.”


Régis Pinguet has been head of the fund selection and analysis department of CNP Assurances since 2007.

He joined the firm in 1987 as head of Insurance Portfolios, among others in charge of the monitoring of Ucits funds.

Pinguet began his career at an accounting firm in 1978 before joining Caisse des Dépôts in 1980 as an accountant specialising in forestry.

He holds a postgraduate degree in corporate finance from IAE de Paris.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

Read more from Adrien Paredes-Vanheule

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