The fund has a strategic allocation of 10 per cent for what it labels diversifiers, but so far the actual allocation is only 1 per cent. These diversifiers include commodities, real estate, private equity and infrastructure.

Nicolas Sobczak, chief investment officer for the fund, said reaching the target allocation was not a simple process and that it would take the FRR at least another two to three years.

He said: “There could be possibilities where we find proxies for these investments, so we might consider investing in real estate investment trusts, for example, which is a good proxy for real estate.” An investment in real estate would be the first time the FRR has ventured into this asset class.

It appears that the main obstacle for the FRR reaching its target of 10 per cent is the administrative burden. Mr Sobczak said it takes a significant amount of time to make these types of investments as a great amount of research is required along with the red tape.

The next year could see a slew of mandate tenders from the FRR as most of its current asset managers are on three-year contracts that are about to expire. Soon there should be tenders for commodities and emerging markets.

So far, it has been a challenging year for the FRR after years of double-digit returns. In 2007, it returned a respectable 4.8 per cent, but this year the fund’s value decreased for the first time.

When asked what the fund was doing to counter the slower returns Mr Sobczak said: “We’re doing what we are supposed to do. This means that we are remaining calm and disciplined on our long-term horizon.

“At this stage we’ve not reached the conclusion that we should dramatically alter our allocation, but we’re being vigilant.”

n For the full interview with Mr Sobczak, see pages 22-23.

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