Adam D. Dixon

The Rise of Pension Fund Capitalism in Europe: An Unseen Revolution?

In recent years European countries have begun to reform their pension systems favouring funded to pay-as-you-go (PAYG) social security systems and supporting the creation of more 2nd and 3rd pillar funded retirement schemes. Though funded pensions remain small in most European countries, they are growing significantly and may limit the persistence of strong varieties of capitalism by providing an endogenous source of change to economic organisation and corporate governance. To explore this scenario this article examines recent developments in France, in particular the creation and the functional organisation of the French sovereign wealth fund the Fonds de reserve pour les retraites (FRR) and the new public sector pension fund the Etablissement de retraite additionnelle de la fonction publique (ERAFP). In terms of institutional design the FRR has the same functional scope, capacity and asset mix as sophisticated global pension funds. The ERAFP, on the other hand, is subject by statute to a conservative asset allocation, manifesting the tension between adopting the scope and practices of other sophisticated global, i.e. Anglo-American, financial institutions. Though as the ERAFP grows in size, it is arguable whether or not it will continue to be constrained. Ultimately, the development of pension funds in France and the creation of a global institutional investor at the heart of the French state portend to increased engagement with global finance and the French political economy.