Investing directly in companies not listed on the stock exchange via life insurance is possible. But the supply is still limited and the investment is not without risks. Deciphering the advantages and disadvantages of combining life insurance and investment capital.
Via your life insurance contract or your individual retirement savings plan (PER), you can place your money, more and more often, in units of account (UC) which invest in private companies, not listed on the stock exchange. .
These funds are called private equity or private equity funds. They target SMEs or mid-sized companies (ETI) with the objective of helping them grow and reselling their participation several years later, generating substantial added value.
However, despite the relaxations provided by the Labor law of 2015, then the Pacte law of 2019, the breakthrough of “private equity” in life insurance remains timid. According to the professional federation France Assureurs, private equity funds represent barely 2.3 billion euros of assets in life insurance contracts, a drop in the ocean compared to the more than 1,800 billion euros of life insurance!
“Lack of knowledge remains the main obstacle to subscription,” according to Pascal Koenig, founder of the Insight AM firm who carried out a survey last spring on investment capital and life insurance among 1,065 savers on behalf of the company. management company NextStage AM, the insurer Spirica and the wealth management firm Maison Herez.
With a limited offer (not all life insurance contracts offer private equity funds, far from it!), these supports remain a little apart in the world of life insurance and it is better to have Consider the advantages and disadvantages before opting for this type of support.
A financial performance uncorrelated with the stock market
Over the past decade, from 2013 to 2022, private equity posted an average annualized return of +14.2%.
In practice, in life insurance, private equity funds rarely reach this level of return, but some still offer an interesting performance: +18% over one year (August 2022/August 2023) for NextStage Croissance* ( accessible in Apicil, Ageas, Axa, Generali, Spirica, SwissLife contracts); +5% for Tikehau Financement Entreprises (MACSF contracts); +3.6% for Isatis Capital Vie & Retraite (listed in particular at Generali); +3.3% for Axa Avenir Entrepreneurs (Axa contracts), etc.
You should know that these funds generally follow a “J” curve, with an initial decline followed by a subsequent growth phase. So you have to be patient and wait for the right time to come out.
Reputed to be less volatile than equity funds, private equity funds are however not exempt from sharp declines or sharp increases. But these movements are not necessarily linked to the stock markets. An interesting decorrelation from a financial perspective, because it allows you to diversify your risks.
More accessible and more liquid
Another advantage of private equity in the context of life insurance: the initial amount necessary to invest is much lower than that of a direct investment. You can invest in this asset class from a few thousand euros, or even a few hundred euros in consumer contracts. Live, the entry ticket is often several tens of thousands of euros.
Additionally, the insurer offers some liquidity – which is not the case when you invest directly in private equity funds. However, the availability of funds may vary depending on insurers and contracts.
Generally, liquidity is guaranteed in case of death, sometimes in case of full redemption, but it may be difficult to withdraw funds in the first years in case of partial redemption or arbitrage, and never in redemptions scheduled partials.
The advantageous tax framework of life insurance
Fiscally, gains and capital gains benefit from the advantageous life insurance regime. As long as you do not withdraw money from your contract, you are not subject to any taxation and if your contract is more than eight years old, you can benefit from the reduction on earnings of 4,600 euros per person (9,200 euros for a tax household).
Despite this, investing in private equity in the context of life insurance does not only have advantages. These funds are considered risky investments, with some of them even reaching level 7 on the official risk scale, the highest level. Before investing, do not hesitate to consult the contractual information document (DIC) of the fund which will give you multiple information, including its level on the risk scale.
Know the risks
It is therefore recommended to invest for a period of at least eight to ten years (sometimes you have no choice, the fund being blocked for several years). Which makes it a strategy perhaps more suited to PER than life insurance, as underlined by Daniel Collignon, Managing Director of Spirica, which currently references around ten private equity funds in its contracts: “ In my opinion, private equity is made for retirement savings, particularly in the context of long-term management.”
Please note, however, it is not possible to invest in these funds as part of scheduled payments. Too bad for retirement savings! However, you can enter a new fund every year. “Investing in private equity is like building up a cellar. It is interesting to acquire different vintages each year,” says Grégoire Sentilhes, president of NextStage.
High management fees at 2.62% on average
The fees associated with these funds are often high, and transparency regarding the information available sometimes leaves something to be desired. According to France Assureurs, only 14 of the 120 private equity funds listed in insurers’ units of account provide information on the level of risk and fees. On average, these funds display fees of 2.62% (in addition to contract management fees), compared to an average fee rate of 1.57% for all units of account.
The Green Industry bill, currently under discussion in Parliament, plans to impose a “minimum proportion” of unlisted “green” assets in the managed management of the Retirement Savings Plan (PER) and in life insurance.
A new boost from public authorities which could help to broaden the offer of private equity funds eligible for these contracts and make it more transparent.
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