Australia’s second-largest pension fund, Australian Retirement Trust, is making a bold move into French government bonds. The fund sees an opportunity in what it believes is an overreaction by markets to France’s fiscal challenges and the potential for European Central Bank rate hikes.
The fund began purchasing 10-year French debt in September as yields surpassed 4.5%. It increased its holdings during October’s market turmoil, when yields spiked to 5%, the highest level since 2002. Jimmy Louca, a senior portfolio manager at the fund, confirmed the strategy.
The decision comes amid growing concerns over France’s fiscal credibility and political instability. However, Australian Retirement Trust appears to be betting that these worries are overstated, positioning itself to benefit from a potential rebound in French bond prices.