Ircantec cuts equity, raises IG fixed income in fund allocation

The Pensions and Solidarity Division of French public financial group Caisse des Dépôts (CDC) manages 48 funds, representing 75,000 public employers including the French state, local authorities and hospitals.

Over €13bn of assets are managed across these 48 funds, which are mainly “pay as you go” schemes, including that of Ircantec, the complementary regime for contractual staff in the French public sectors (€9.5bn of assets).

The Ircantec represents three million contributors and two million pensioners as of 2015.

Mandates for listed investments last for five years, renewable one year while mandates for non-listed investments are granted for 10 years and can be renewed for one year twice.

“Calls for tenders at Caisse des Dépôts are a restricted procedure. It consists of two rounds. The first round can be seen as a quantitative filter as we assess the capabilities of asset managers. The second round focuses more on the qualitative side,” Caroline Le Meaux (pictured), head of External Asset Management at CDC’s Pensions Division, explains to InvestmentEurope.

“We currently renew our campaign of requests for proposals for our FCPs (French mutual funds) that represent 85% of the funds we managed.”

An example has been the request for proposals for Ircantec’s green bond mutual fund that has been launched early October. The procedure is due to last until mid 2017.

The launch of other RFPs is already planned on indexed products and equities such as these focusing on European equities and global equities ex-Europe at the end of 2017.

“The competitive dialogue is another procedure we use. We co-build the offering with a selected asset manager. This procedure will allow us to pick an asset manager that can set up with us a risk management overlay strategy,” Le Meaux says.

SRI, policies and challenges

One of Ircantec’s features is to be SRI-fully invested. Its strict SRI charter requires from companies in which it invests to comply with a number of international standards such as  the Universal declaration of human rights; the conventions adopted by the International Labour Organisation; the Rio declaration on the environment and development; the United Nations convention against corruption as well as the objectives of the COP 21’s agreement on the climate adopted in Paris in December 2015.

“We look at SRI principles asset managers apply to themselves in the first round of the RFP. The second round focuses on the integration of SRI to their process. SRI must be core in their investment process, not an additional filter they add to it at the very end or at the beginning. We are looking for top quality performance, and from our experience, SRI fund managers are far from showing worse funds performances in comparison to non-SRI fund managers,” Le Meaux pinpoints.

However, she acknowledges finding SRI strategies in certain asset classes such as emerging market equities remains complex. Ircantec’s search is still ongoing in that space.

“Our criteria for SRI emerging markets equity funds differ from SRI equity funds focused on developed markets. Even though the track record is not that long on the global SRI emerging market equity universe, the offering is being built and the SRI data in emerging markets is improving,” the head of External Asset Management at CDC’s Pensions Division argues.

As Ircantec implements its own SRI policy, it does not take into account the TEEC and SRI labels granted to funds by the French government in its calls for tenders.

“French pension schemes do not share the same SRI values depending of the affiliates. The SRI label does not match our SRI expectations but it remains a good indicator nonetheless for individuals and institutions that have not been involved yet into the SRI process.

“The label TEEC fits our investment goals, especially regarding these of our non-listed investments. We have a particular focus on non-listed investments in France. Most of the infrastructure funds we are invested in have been awarded the TEEC label but we were allocating assets to these strategies before the label. Being awarded the label for a fund is not a requirement in our process,” Le Meaux says.


The head of External Asset Management at CDC’s Pensions Division says a move is considered in Ircantec’s equity fund allocation. The institution’s investment tickets in equity strategies are set to be reduced to €500m from €1bn, being considered too large currently.

“A €1bn ticket management exposes us to a huge concentration risk,” Le Meaux assesses.

Allocation to fixed income asset classes is currently being reviewed as well because of the yield and volatility issues.

“We have launched RFPs over the credit segment in 2015 and we do hold a larger equity exposure than initially set in our allocation because of those issues.

“We have raised our allocation to investment grade strategies. We did not have the right to allocate assets to high-yield strategies until recently.

“We are now authorised to select high yield strategies but we chose to not use this option because we considered that we have missed the ”good years” of high yield and we do not want to have the bad ones. Hence we are not going to precipitate ourselves on this asset class. It would be a shame to have a bad experiment of high yield as from the start,” Le Meaux explains.

As for other strategies, Ircantec made a move towards to systematic management back in 2015 by selecting three active systematic managers, Robeco for a minimum volatility fund, Quoniam for a max sharp-focused strategy and Allianz for a factor investing fund.

Considering alternatives, Le Meaux estimates interesting strategies exist in that universe but Ircantec wants to address issues of the low-rate environment and of the global management risk in the portfolio in priority.

“If we allocate €100m of assets over €9.5bn to alternatives, the overall performance will not fundamentally change,” Le Meaux says.

Also the Ircantec might possibly be further constrained in alternative investment capabilities by the French law. Vincent Delsart, chief investment officer at CDC’s Pensions Division, discusses the topic with InvestmentEurope here.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is deputy editor and 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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