Click to increase image sizeClick to decrease image size Notes The author would like to thank Gordon Clark, Ashby Monk and an anonymous reviewer for helpful comments. The author would also like to thank Rob Bauer and the University of Maastricht finance department for facilitating a visiting research position. Support for research was provided through an Oxford University Scatcherd European Scholarship. None of the above should be held responsible for errors, omissions or any opinions expressed herein. Peter Drucker, The Unseen Revolution: How Pension Fund Socialism Came to America (HarperCollins, 1976), p. 47. Michael Clowes, The Money Flood: How Pension Funds Revolutionized Investing (Wiley, 2000). Richard Minns, The Cold War in Welfare: Stock Markets versus Pensions (Verso, 2001); Ewald Engelen, ‘The Logic of Funding European Pension Restructuring and the Dangers of Financialisation’, Environment and Planning A, Vol. 35, No. 8 (2003), pp. 1357–72; Paul Langley, ‘In the eye of the “perfect storm”: the final salary pension crisis and financialisation of Anglo-American capitalism’, New Political Economy, Vol. 9, No. 4 (2004), pp. 539–58; Adam Harmes, ‘Institutional investors and the reproduction of neoliberalism’, Review of International Political Economy, Vol. 5, No. 1 (1998), pp. 92–121; see also Robin Blackburn, Banking on Death, or Investing in Life: The History and Future of Pensions (Verso, 2002). Gordon L. Clark, Pension Fund Capitalism (Oxford, 2000); James P. Hawley & Andrew T. Williams, The Rise of Fiduciary Capitalism: How Institutional Investors Can Make Corporate America More Democratic (University of Pennsylvania Press, 2000). OECD, Pension Markets in Focus, No. 3 (OECD, 2006). Gordon L. Clark & Noel Whiteside (eds), Pension Security in the 21st Century: Redrawing the Public-Private Debate (Oxford University Press, 2003); Gordon L. Clark, European Pensions and Global Finance (Oxford University Press, 2003). Giuliano Bonoli, Vic George & Peter Taylor-Gooby, European Welfare Futures: Towards a Theory of Retrenchment (Polity Press, 2000). Dutch pension funds, such as ABP, have become some of the most sophisticated and active pension-fund investors in world, warranting their inclusion alongside Anglo-American pension funds. Peter Hall & David Soskice (eds), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (Oxford University Press, 2001). For more explicit critiques of the varieties of capitalism approach, see Colin Crouch, Capitalist Diversity and Change (Oxford University Press, 2005); Mark Blyth, ‘Same as it Never Was: Temporality and Typology in the Varieties of Capitalism’, Comparative European Politics, Vol. 1, No. 2 (2003), pp. 215–25; Chris Howell, ‘Varieties of Capitalism: And The There Was One?’, Comparative Politics, Vol. 36, No. 1 (2003), pp. 103–24. As of 31 December 2003 non-resident ownership of CAC 40 firms was 44 per cent. See Yves Mansion, ‘Pour l'Amélioration de l'Exercice des Droits de Vote des Actionnaires en France,’ Autorité des Marchés Financiers (2005), pp. 10–11. Paul Pierson (ed.), The New Politics of the Welfare State (Oxford University Press, 2001). Mary O'Sullivan, ‘Acting Out Institutional Change: Understanding the Recent Transformation of the French Financial System’, Socio-Economic Review, Vol. 5, No. 3 (2007), pp. 389–436. Clark, Pension Fund Capitalism. See Vivienne A. Schmidt, ‘French Capitalism Transformed, But Still a Third Variety of Capitalism’, Economy and Society, Vol. 32, No. 4 (2003), pp. 526–54. For Europe, see Martin Feldstein & Horst Siebert (eds), Social Security Pension Reform in Europe (University of Chicago Press, 2002). Peter Starke, ‘The Politics of Welfare State Retrenchment: A Literature Review’, Social Policy & Administration, Vol. 40, No. 1 (2006), pp. 104–20. John Myles & Paul Pierson, ‘The comparative political economy of pension reform’, in Pierson, The New Politics of the Welfare State, pp. 305–33. OECD, ‘Pension Markets in Focus’, p. 3. Bruno Palier & Guiliano Bonoli, ‘La Montée en Puissance des Fonds de Pension: une Lecture Comparative des Réformes des Systèmes de Retraite, entre Modèle Global et Cheminements Nationaux’, L'Année de la Régulation, Vol. 4 (2000), pp. 209–50. Clark, European Pensions and Global Finance, pp. 52–78. Bruno Palier, ‘Facing the Pension Crisis in France’, in Clark & Whiteside, Pension Security in the 21st Century: Redrawing the Public–Private Debate, pp. 93–114. Ibid. ‘Loi nº 2003-775 du 21 aout 2003 portant réforme des retraites’, Journal Officiel de la République Française, 2003. Speech of Nicolas Sarkozy at the Sénat Français, 18 September 2006. Denis Marionnet, Banque de France, ‘Les Comptes Financiers de la Nation en 2006’, Insee Première, No. 1137 (2007), pp. 1–7. Robert Palacios, ‘Securing Public Pension Promises Through Funding’, in Olivia S. Mitchell & Kent Smetters (eds), The Pension Challenge: Risk Transfers and Retirement Income Security (Oxford University Press, 2003), pp. 116–58. OECD, ‘Pension Markets in Focus’, p. 11. CPP Investment Board & Irish NPRF, http://www.cppib.ca & http://www.nprf.ie (accessed 1 October 2007). Martin Wolf, ‘We are living in a brave new world of state capitalism’, Financial Times, 17 October 2007. FRR http://www.fondsdereserve.fr (accessed 1 September 2007). Gary P. Brinson, Brian D. Singer & Gilbert L. Beebower, ‘Determinants of Portfolio Performance II: An Update’, Financial Analysts Journal, Vol. 47, No. 3 (1991), pp. 40–8. Massimo Guidolin & Allan Timmermann, ‘Economic Implications of Bull and Bear Regimes in UK Stock and Bond Returns’, The Economic Journal, Vol. 115, No. 500 (2005), pp. 111–43. Eugene F. Fama & Kenneth R. French, ‘The Equity Premium’, Journal of Finance, Vol. 57, No. 2 (2002), pp. 637–59. John Y. Campbell & Luis M. Viceira, ‘The Term Structure of the Risk-Return Trade-Off’, Financial Analysts Journal, Vol. 61, No. 1 (2005), p. 38; see also John Y. Campbell & Luis M. Viceira, Strategic Asset Allocation: Portfolio Choice for Long-Term Investors (Oxford University Press, 2002). Nicholas Barberis, ‘Investing for the Long Run when Returns are Predictable’, Journal of Finance, Vol. 55, No. 1 (2000), pp. 225–64. For a more complete understanding of these instruments and how they work, see John Hull, Options, Futures and Other Derivatives (Prentice-Hall, 2005). FRR, Annual Report 2006. See E. Philip Davis & Benn Steil, Institutional Investors (MIT Press, 2001). Roy P.M.M. Hoevenaars, Strategic Asset Allocation & Asset Liability Management, Unpublished PhD Thesis, Universiteit Maastricht, 2008. Carolina Fugazza, Massimo Guidolin & Giovanna Nicodano, ‘Investing for the Long-run in European Real Estate’, Journal of Real Estate Finance and Economics, Vol. 34, No. 1 (2007), pp. 35–80. Gary Gorton & K. Geert Rouwenhorst, ‘Facts and Fantasies about Commodity Futures’, Financial Analysts Journal, Vol. 62, No. 2 (2006), pp. 47–68. Georg Inderst, ‘Infrastructure's Long-Term Payback’, Investment and Pensions Europe, 1 October 2005. Steven N. Kaplan & Antoinette Schoar, ‘Private Equity Performance: Returns, Persistence, and Capital Flows’, Journal of Finance, Vol. 60, No. 4 (2005), pp. 1791–823. FRR Supervisory Board Resolution, May 2006. Jelle Mensonides, ‘ABP Investments: from Local to Global Investor’, in Rob Bauer, Ren Maatman, Jelle Mensonides, Tom Steenkamp, Jan Kune & Monique Sturmans (eds) Vergezichte: Over Beleggen, Pensioenen en Toezicht (ABP, 2005), pp. 333–6. ABP, ‘Strategic Investment Plan 2007–2009’ (ABP Investments, 2007). Gordon L. Clark, ‘London's Place in the World of Finance: A Supply-side Approach’, Journal of Economic Geography, Vol. 2, No. 4 (2002), pp. 433–53. See Gordon L. Clark & Tessa Hebb, ‘Pension Fund Corporate Engagement: The Fifth State of Capitalism’, Relations Industrielles/Industrial Relations, Vol. 59, No. 1 (2004), pp. 142–71. Here, I must mention that some scholars may perceive that the type of pension fund, either DB or DC, has an important effect on the turnover rate of capital and whether the capital is ‘patient’ or ‘impatient’ vis-à-vis the firm – that is, the fund/firm relationship. This is evident in the work of Michel Goyer, who argues that DB pensions represent ‘patient’ capital whereas DC pensions represent ‘impatient’ capital. See ‘Varieties of Institutional Investors and National Models of Capitalism: The Transformation of Corporate Governance in France and Germany’, Politics & Society, Vol. 24, No. 3 (2006), pp. 399–430. One problem with this approach is that the distinction between DB and DC has become less relevant globally as many DB pensions have closed and/or are being replaced with hybrid forms. More importantly, this approach fails to recognise that many, if not most, DB pension funds because of size constraints delegate investment management to outside managers, as do the FRR and the ERAFP. These outside managers include the mutual funds, hedge funds and private-equity funds which represent the ‘impatient’ capital in this theoretical approach. So, for example, a public DB pension may have a low turnover rate, a sign of ‘patient’ capital, in its direct equity investment but also have portions of its allocation invested in hedge funds or private-equity funds with high turnover rates that also engage firms. Regarding this view see Michael C. Jensen & William H. Meckling, ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’, Journal of Financial Economics, Vol. 3, No. 4 (1976), pp. 305–60. For a more thorough discussion on the theory of the firm in contemporary corporate finance, see Luigi Zingales, ‘In Search of New Foundations’, Journal of Finance, Vol. 55, No. 4 (2000), pp.1623–53. FRR, ‘Proxy Voting Guidelines’, Unofficial Translation, April 2007. Official translation from FRR of, ‘Decree No. 2001-1214 of 19 December 2001 pertaining to the Fonds de réserve pour les retraites’, Journal Officiel de La République Française, 2001. James P. Hawley & Andrew T. Williams, ‘Shifting Ground: Emerging Global Corporate-Governance Standards and the Rise of Fiduciary Capitalism’, Environment and Planning A, Vol. 37, No. 11 (2005), pp. 1995–2013; Tessa Hebb & Dariusz Wójcik, ‘Global Standards and Emerging Markets: The Institutional-Investment Value Chain and the CalPERS Investment Strategy’, Environment and Planning A, Vol. 37, No. 11 (2005), pp. 1955–74. ‘FRR, Proxy Voting Guidelines’. Deminor Rating, Application of the one share – one vote principle in Europe (Deminor Rating, 2005). See Mike Burkart & Samuel Lee, ‘The One-Share, One-Vote Debate: A Theoretical Perspective’, European Corporate Governance Institute Finance Working Paper Series, No. 176 (2007). François Morin, ‘A Transformation in the French Model of Shareholding and Management’, Economy and Society, Vol. 29, No. 1 (2000), pp. 36–53. Mansion, ‘Pour l'Amélioration’, pp. 10–11. Ben Clift, ‘French Corporate Governance in the New Global Economy: Mechanisms of Change and Hybridisation within Models of Capitalism’, Political Studies, Vol. 55, No. 3 (2007), pp. 546–67; for reference to recombinant capitalism see Colin Crouch, ‘Models of Capitalism’, New Political Economy, Vol. 10, No. 4 (2005), pp. 439–56. O'Sullivan, ‘Acting Out Institutional Change’. Sukhdev Johal & Adam Leaver, ‘Is the Stock Market a Disciplinary Institution? French Giant Firms and the Regime of Accumulation’, New Political Economy, Vol. 12, No. 3 (2007), pp. 349–67. ERAFP Investment Policy, 14 June 2006. ‘Décret n˚2004-569 du 18 juin 2004 relatif à la retraite additionnelle de la fonction publique. art. 29, Journal Officiel de la République Française, 2004. Code de la Sécurité Sociale, R731-25 & R731-26. ‘Arrêté du 26 novembre 2004 portant application du décret n˚ 2004-569 du 18 juin 2004 relatif à la retraite additionnelle de la fonction publique. art. 19’, Journal Officiel de La République Française, 2004. Author's translation of: ‘Décret n˚ 2004-569 du 18 juin 2004 relatif à la retraite additionnelle de la fonction publique. art. 29’, Journal Officiel de la République Française, 2004. Russell Galer, ‘“Prudent person rule” Standard for the Investment of Pension Fund Assets', OECD Financial Market Trends, No. 83 (2002). Harry Markowitz, ‘Portfolio Selection’, Journal of Finance, Vol. 7, No. 1 (1952), pp. 77–91. E. Philip Davis, ‘Prudent Person Rules or Quantitative Restrictions? The Regulation of Long-Term Institutional Investors’ Portfolios', Journal of Pension Economics and Finance, Vol. 1, No. 2 (2002), pp. 157–91. John H. Langbein, ‘The Uniform Prudent Investor Act and the Future of Trust Investing’, Iowa Law Review, Vol. 81 (1995–1996), pp. 641–55. Pierre-Noël Giraud, ‘Les fonds de pension: Vers un nouveau capitalisme ?’, Revue Etudes Centre d'économie industrielle, Ecole Nationale Supérieure des Mines de Paris, Vol. 394, No. 2 (2001), pp. 165–79; Martine Bulard, ‘Les retraités trahis par les fonds de pension’, Le Monde Diplomatique, May 2003. See OECD, ‘2006 Survey of Investment Regulations of Pension Funds’ (OECD, 2007). In an interview with ERAFP representatives held in Paris in late November 2007 it was suggested, in concurrence with the analytical logic of this section, that the rapid growth of the fund's assets would likely induce change in fund's asset management and investment strategy. I follow the methodology of ‘close dialogue’ and maintain the anonymity of those interviewed. See Gordon L. Clark, ‘Stylized Facts and Close Dialogue: Methodology in Economic Geography’, Annals of the American Association of Geographers, Vol. 88, No. 1 (1998), pp. 73–87. Author's translation of French president Nicolas Sarkozy's speech at the US Congress, 7 November 2007. Johal & Leaver, ‘Is the Stock Market a Disciplinary Institution?’, p. 364. Gordon L. Clark, ‘Expertise and Representation in Financial Institutions: UK legislation on Pension Fund Governance and US Regulation of the Mutual Fund Industry’, 21st Century Society, Vol. 2, No. 1 (2007), pp. 1–23. Gordon L. Clark, ‘Governing finance: global imperatives and the challenge of reconciling community representation with expertise’, Economic Geography, forthcoming. O'Sullivan, ‘Acting Out Institutional Change’. Rafael La Porta, Florencio Lopez-De-Silanes & Andrei Schleifer, ‘Corporate Ownership Around the World’, Journal of Finance, Vol. 54, No. 2 (1999), pp. 471–517. 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