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(Bloomberg) -- In his last years as head of Groupe Bruxelles Lambert SA, Belgian billionaire Albert Frere transformed the investment firm by reducing its stake in the French energy companies that made his reputation.

Frere, who turns 89 today, is stepping down as chief executive officer of GBL and as vice chairman and executive director of its biggest shareholder, Pargesa SA, both of which he controls with Canada’s Desmarais family, the companies announced this week.

Frere and the Desmarais family have diversified the company away from the French energy and water giants Total SA, GDF Suez SA and Suez Environnement to make way for investments in smaller companies such as Umicore, a materials specialist, and private- equity stakes. Returns for shareholders from the strategy have so far been limited.

“The change emerged out of a frustration from a lack of influence at the board level in some of these large companies,” Hans D’Haese, analyst at Banque Degroof SA, said by telephone from Brussels. “Now they have taken stakes in smaller companies in which they have a bigger say.”

GBL shares have returned 6.7 percent annually over the past five years, including dividends, trailing the median return of 14 percent for Western European investment companies with a market value greater than $1 billion, according to data compiled by Bloomberg.

“GBL’s long-term performance is quite OK, while over the short term, over the past five years, it has been below peers,” D’Haese said by telephone. “It’s too early to assess the new strategy.” A spokeswoman for GBL in Brussels declined to comment on the company’s performance.

Portfolio Shift

The shift into holdings in smaller companies and alternative investments is designed to reduce “country risk” and give GBL influence through stakes of as much as 30 percent, according to the latest investor presentation on GBL’s website.

The result has been a lowering of the holding in Total to 3.2 percent from 4 percent before 2013 and a plan to sell off holdings in GDF Suez and Suez Environnement through convertible bonds.

GBL owns stakes in seven publicly traded companies that it considers “strategic” investments -- Total, GDF Suez, Suez Environnement, Lafarge SA, SGS SA, Pernod Ricard SA and Imerys.

The goal is for those to account for 75 percent to 80 percent of assets, with 10 percent to 15 percent in so-called incubator holdings in smaller companies that may or not be listed, according to the company’s website. The rest of the portfolio is in financial investments such as private-equity stakes or debt holdings.

Forming Pargesa

Frere cultivated longstanding relationships with energy barons in France, including GDF Suez SA Chief Executive Officer Gerard Mestrallet and former Total chief Christophe de Margerie.

France, where the economy has barely grown in three years, also was the country where Frere and Paul Desmarais Sr. made their first investment together. The pair created Pargesa in 1981 to manage a stake in Banque de Paris et des Pays-Bas (Suisse), a subsidiary of the French bank now known as BNP Paribas SA.

The French investments put them at the center of some of the country’s biggest deals. Frere took a stake in Belgian oil company Petrofina SA in the early 1980s, which later turned him into one of Total’s biggest shareholders after the French oil company swallowed Petrofina and Elf Aquitaine SA.

GBL has been listed on the stock market since 1956 and controlled by the Frere and Desmarais families since 1990.

--With assistance from John Martens in Brussels.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Phil Serafino, Thomas Mulier

Bloomberg