The French Pension Revolution

French pension funds are struggling with low public market returns and decumulation challenges due to demographic shifts, as fewer workers support more retirees.1  The pay-as-you-go (PAYGO) pension system is now unsustainable, prompting President Emmanuel Macron’s administration to encourage greater investment in private assets for better returns.

Recent legislation has allowed pension funds to invest in unlisted assets, with some workplace pensions even mandating minimum allocations to private assets. Retail investors are also gaining access to private assets through pension products, including social impact funds focused on initiatives like energy transition. This paper examines the regulatory changes and pension trends driving illiquid and impact investments in France.

France’s Personal Pension System Ushers in Private Investments

Under Macron, France has encouraged private capital investments to boost infrastructure development and small- and medium-sized enterprises (SMEs), notably through the 2019 PACTE²  law, which simplified procedures and made retirement savings schemes more attractive by allowing investments in unlisted assets. The main retirement product to emerge from this legislation is the Produit d’Epargne Retraite³  (PER), which offers individuals flexible access to private equity and debt, supported by the FRPS⁴ regime and new laws aligned with the Institutions for Occupational Retirement Provision II Directive (IORP II Directive).⁵

Legislative reforms have also made evergreen funds, with flexible redemption and secondary liquidity, more appealing for retail investors seeking private asset exposure. The European Long-term Investment Fund 2.0 (ELTIF 2.0) Regulation, enacted in January 2024, further enables PERs and retail investors to access private markets with lower minimums.⁶  Looking ahead, the Alternative Investment Fund Managers Directive II (AIFMD II), scheduled to take effect April 2026, is expected to expand private credit activity and fund options, while secondaries and hybrid funds offer additional liquidity and flexibility for investors.

Public Reserve Funds Step In

A number of other legislative reforms have paved the way for an increase in private investments within the public sector French pension system.

In 2019, the French civil service public pension fund, ERAFP,⁷ was permitted by the Order of 31 July 2019 on the French Public Service Additional Pension Scheme to increase its allocation to equities and funds of unlisted assets to 45% from a 40% limit, and boost its real estate investments to 15% from 12.5%.⁸ In 2020, the Fonds de Réserve pour les Retraites (FRR),⁹ a public administrative establishment that serves as France’s reserve fund to finance the country’s pension system, announced its aim to double its private equity exposure with an allocation to 5% of its total assets.¹⁰ This is part of a long-term plan to increase its allocation to illiquid assets over the next two decades.

In parallel, the largest French pension provider, Agirc-Arrco, whose complementary scheme manages more than €85 billion of reserves, serves as another domestic anchor investor base for private markets.¹¹ The Tibi 2 initiative, launched in 2024 with €7 billion of commitments from 35 French institutions, further strengthens the late-stage venture and growth equity ecosystem.¹²

Philanthropic and ESG Aims

Legislative changes and rising investor interest in public good have driven French pension funds to allocate more to alternative assets, especially social impact investments. Since 2022, PER savers can invest in social impact funds, with retail social impact investments in France growing by €2 billion in 2024, mostly from employee savings schemes. ¹³ The Autorité des Marchés Financiers (AMF), the French regulator has authorized ELTIFs focused on infrastructure, and the Green Industry Law¹⁴ now requires a portion of pension and life insurance savings to be invested in unlisted, sustainable assets.

Pension funds like ERAFP and FRR are increasingly integrating Environmental, Social, and Governance (ESG) criteria to align with climate and sustainability goals. Given that start-ups founded only by women received just 1.8% of the total capital invested in venture-backed start-ups in Europe in 2023, thematic and impact funds targeting women-led enterprises and late-stage tech, via Tibi 2, are also a focus in France on the ESG front.¹⁵

Simplifying Private Asset Fund Allocations in France and Beyond

As regulatory changes in France allow pension funds to invest more in private assets, asset managers face challenges such as portfolio administration for alternative funds. J.P. Morgan offers a comprehensive suite of services, including NAV financing solutions adapted to semi-liquid funds, depositary and administration services, and end-to-end alternatives support across multiple jurisdictions. Our expertise spans open- and closed-ended funds, enabling us to customize operating models for various fund structures, including ELTIFs and other private asset products. We provide advanced data management and reporting through Fusion by J.P. Morgan, leveraging AI and automation to streamline complex private asset operations. For those navigating the complexities of private asset funds, partnering with J.P. Morgan Securities Services pairs expert guidance and robust asset servicing.