Andorra’s €1.5bn Fons de reserve de jubilació (FRJ) is a first-pillar pension fund prioritising above-inflation returns, strong governance and sustainable investment. Over the past decade it has generated an annualised average return of 1.9%, comfortably meeting its target. The fund is governed by a board made up of representatives from all stakeholder groups. This board approves the fund’s investment strategy as proposed by a professional committee, which is then responsible for implementation and oversight. FRJ promotes transparency through public access to financial reports and actuarial studies.

The investment strategy combines external and internal management capabilities, maintaining a total expense ratio of 0.23%. This marks an 11-basis-point reduction on the cost level in 2016 when the fund was first established. Strong governance, cost control and high-quality service contribute to consistent performance with limited volatility.

FRJ aims to lead by example in ESG themed investing. It became a UN PRI signatory in 2023 and implemented the country’s first ESG policy for a pension fund in 2021. This policy includes ESG integration, exclusions, impact and thematic investing, and active ownership requirements. FRJ conducts an annual ESG analysis of the portfolio, which is carried out by an independent third party.

In 2022, the fund designed a bespoke ‘dashboard’ to help monitor the key performance indicators for its ESG strategy. This allows the oversight committee to easily monitor external asset managers, control exclusions, and measure impact and carbon footprints.

The wider impact of FRJ extends to its role as the main reference in Andorran pensions. The fund is positioned to play a major role in potential pension reforms, showcasing scalability and adaptability in its governance structure. As Andorra contemplates pension reform, FRJ is seeking to promote itself as a crucial player in shaping the country’s pension landscape.