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Jean Castellini

“Imagine a €2.5-billion FRC managed at 80%,

or even 100%, in a sustainable manner!”

The reserve fund (FRC) represents a financial cushion for the Monégasque state. The objective of Jean
Castellini, Minister of Finance and the Economy, is today to turn it completely green.

Historically, what are the origins of the The Norwegian fund, the world’s largest How has the management of this liquid
Constitutional Reserve Fund? Who had the sovereign wealth fund, is worth almost $1 part evolved?
ingenious idea of creating this nest egg for trillion. It is present in the capital of some Historically, we had delegated the management
the Principality? 9,200 companies and holds the equivalent of the fund to management companies that are
It dates back to the 1962 Constitution. A of 1.5% of the global market capitalisation. subsidiaries of major banking establishments
provision of the Basic Law provides that How does the Monégasque FRC work? in the Principality. In 2009, we carried out the
budget surpluses are allocated to the FRC Globally, the FRC is made up half - or €2.5 first diversification of the FRC’s assets: 70%
and that the amount of the deficit be drawn billion - of liquid assets and half of illiquid of the envelope in historical management
from it, if necessary. The first sovereign wealth assets - or €2.5 billion. The illiquid part mainly and 30% in specialised management. A
funds were created in the 1950s in the Gulf includes real estate [Ed: the Monaco embassies consultant commissioned by the government
states. It was about managing and growing, in London and New York, for example, or state- had recommended choosing managers
as later in Norway, the surpluses linked to oil owned buildings], inalienable shares, such as specialised by sector (emerging markets,
exports. In Monaco, we do not have revenues the Société des Bains de Mer, the participation sustainable investments, etc). We have also
linked to natural resources, so we built up a of the Monégasque State in Nice Airport, gold introduced quantitative management [Ed:
reserve with our own “black gold”, namely the reserves. The liquid part is mainly composed quantitative approaches use mathematical
budget surpluses resulting from our sound of shares and bonds, invested through funds models to build less risky portfolios].
management of public finances and, above governed by Monégasque law or open funds
all, from the absence of debt. governed by foreign law. What is the equities/bonds split?
For so-called diversified funds, the majority is
in bonds and a maximum of 30% in equities.
For specialised funds, it depends on the asset
class selected.

Has this diversification increased?
After my appointment to the government, it
was decided to invest in other asset classes
whilst pursuing this search for profitability:
absolute return without benchmark, passive
management strategies with the objective
of reducing costs and placing the selected
managers in competition, private equity
strategy, in particular by favouring sustainable
investments and so on.

Has this strategy resulted in better
© Depositphotos/Lenets_Tatsiana Profitability can exceed 10% per year in a
profitability? If so, how much?

segment such as private equity. The only
thing that is sacrificed is liquidity, since
the investor is committed over time; but on

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