What is in the Eurofunds? What is their gross financial return for the insurance company? How are the different types of funds in euros characterized?
As every year, Good Value for Money has just analyzed the financial composition and gross financial returns of around 110 euro funds of various natures at the end of 2021. Thanks to the richness of the database constituted by Good Value for Money and made available to the members of the club (accessible to all), it is possible to provide a “market” vision of for seven types of funds in euros :
- Funds in euros” classics »,
- Funds in euros”property »,
- Funds in euros” dynamic»,
- Funds in euros” pension schemes»,
- funds” eurogrowth»,
- Funds in euros” with partial warranty »,
- Funds in euros” infrastructure “.
The economic return on the Eurofund’s assets increased in 2021 thanks to developments in the financial markets, the CAC 40 in particular has increased by almost 29% during the year. Good Value for Money recorded the following achievements for 2021:
- 3.88% for funds in euros property»,
- 2.97% for funds in euros pension schemes»,
- 2.45% for funds in euros classics»,
- 2.41% for funds in euros dynamic»,
- 1.52% for the funds eurogrowth“.
During the last five years (period 2017-2021) the difference in the average financial performance according to the type of funds in euros is the next:
- Funds in euros for pension schemes:
+0.49% (49 cents) better per year than traditional euro funds,
- Property funds in euros:
+ 1.44% (144 cents) better per year than traditional euro funds,
- Dynamic euro funds:
+0.32% (32 cents) better per year than traditional euro funds.
The three parameters that explain these differences in financial results are the following:
- the importance of the diversification pocketi.e. non-bond assets: shares, real estate, infrastructure, private equity, etc.
- the average rating of bond counterpartiesknowing that the higher the rating, the lower the financial performance, i.e. tense,
- the relative weight of corporate bonds (including financial companies) within the bond segment compared to government bonds (public and para-public sector).
Concerning average rating of bond counterpartiesleaders of dynamic euro funds gain more exposure than in the case of classic Euro funds:
- that average bond rating of dynamic euro funds is A-whereas it is A+ for classic Euro funds.
- Analyzing in detail by rating level, we note a relative weight of BB-rated bonds at 30% of the bond segment on average in dynamic Euro funds, whereas there is almost none in classic Euro funds (1% on average).
- One explanation for this discrepancy is increased ability of BB bonds to generate returns, without the counterparty necessarily being bad. But the costs of these Solvency II obligations prevent significant investment in traditional Eurofunds for the simple reason that the volumes involved have nothing to do with dynamic Eurofunds.
Without surprise, real estate funds in euro are invested with an average of 35% in real estate assets. It is obvious that such a weight of real estate requires good management of inflows and outflows of this type of fund in euros. Also, financial managers of real estate euro funds is led to manage them ” like milk on fire »:
- by accepting in the form of collection flows only those amounts which they believe they are able to invest under reasonable conditions in property assets: direct assets, SCPI or SCI shares, OPCI shares, property shares, etc.
- limitingif applicable, output currents if these are larger than the collection.
Regarding the relative weight of the different types of Eurofunds, classic euro funds are predominant compared to other funds. Based on the work carried out, Good Value for Money comes to the following estimate:
- “Traditional” Eurofunds: 88.0% of the total,
- Property funds in euros: 0.5% of the total,
- “Dynamic” Eurofunds: 0.2% of the total,
- “Pension funds” in euros: 11.0% of the total,
- “Eurocroissance” funds: 0.2% of the total amount.
The key elements regarding the composition of classic euro funds at the end of 2021 are the following:
- 77.6% bonds whose:
- 3/5 of the company’s,
- 2/5 of sovereigns and parastatals,
- 9.4% equitywith widely varying policies depending on the investment companies directly or via UCIs (generally from the “in-house” asset management company),
- 6.8% real estate,
- 3.0% in cash.
To learn more about Good Value for Money’s analysis of the composition of Euro funds:
All ownership and distribution rights reserved to Good Value for Money.