France’s Fonds de Réserve pour les Retraites (FRR) has committed an additional €100m to its mandates dedicated to listed French small and medium-sized enterprises, extending its ongoing support for this segment of the equity market.

French small and mid-cap valuations have deteriorated significantly since 2018, with underperformance accelerating in 2021 and again in mid-2024.

According to FRR, this has been driven by a slowdown in French economic growth relative to most other European countries, combined with a specific political backdrop.

Despite displaying solid fundamentals, innovation capacity and strategic agility, French small caps have continued to trade at a widening discount compared with large-cap stocks. By the end of February 2025, this gap had reached nearly –20 per cent.

FRR noted that this environment has been partly self-reinforcing. Investor appetite for the segment has weakened in recent years, leading to net outflows, very few new listings, and takeovers carried out with low premium levels.

In its role as a public institution, FRR has signed the Manifeste, published in 2025 under the leadership of Euronext and bringing together the broader Paris market ecosystem. The initiative positions the fund as a supporter of improved corporate financing through capital markets.

Against this backdrop, FRR decided to strengthen its investments in the segment by allocating an additional €100m between late March and early April.

The funds were deployed through three of the four mandates operating in this market and managed by Amiral Gestion, HSBC AM and Indépendance AM. Between late March and the end of October, the average performance of French small-cap equities was around +15 per cent.

FRR said this latest allocation reaffirms the commitment it made more than 15 years ago to embed French small and mid-cap equities in its asset allocation.

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