Analysis by Good Value for Money of the FCPR framework in life insurance and PrimoPacte 2 (Primonial)

That FCPR (Risk Investment Mutual Funds) is collective investment undertakings mainly in companies that are not listed on the stock exchange :

  • They belong the world of private managementalso called “private equity”.
  • They constitute one separate asset classwith an investment cycle and an evolution of their valuation over time that has nothing to do with stock markets.
  • That the performance of an FCPR depends on the right choice of companies to invest ingenerally SMEs (small and medium-sized enterprises) and ETIs (medium-sized enterprises), with identified growth potential.
  • An FCPR is invested at least 50% in securities of unlisted companies on the stock exchange.
  • That subscription to an FCPR does not give rise to no special tax benefits. The applicable taxation is the taxation of the framework within which the units in the FCPR are acquired, e.g. life insurance if a person buys units of FCPR in his contract.

that usual life cycle of an FCPR is the next:

  • Step 1. Definition of FCPR investment goals in terms of targeted companies (size, location, sector of activity), average investment ticket per company, overall financing framework and the duration of the fund.
  • Step 2. Collection of FCPR funds, generally over a period of 12 to 18 months, knowing that this period can be shortened if the subscription is faster than expected. Or that the fund management company, conversely, considers that it will not be able to correctly invest more than the amounts that have already been collected to date.
  • Step 3. Realization of investments in companies that meet FCPR specifications. Look for a minimum distribution of risks between a sufficient number of companies. Management and monitoring of investments with a view to optimizing value creation. This step is not done all at once, but gradually. It usually lasts between 6 and 8 years.
  • Step 4. Withdrawal of its holdings by the FCPR. The challenge here is to resell the securities that FCPR acquires in various companies, which usually makes it possible to value the investments made. This period can be spread over one to two years in order to complete the excursions in good conditions.
  • Step 5. Liquidation of FCPR and repayment to each of the investors of their share of the fund’s value.

Considering this life cycle, the valuation of an FCPR usually follows a “J” curve. Specifically, the FCPR sees its value deteriorate during the first few years due to the cost of processing investment files, knowing that there is still almost no income or capital gain. At the end of the FCPR’s life cycle, its value usually increases rapidly due to realized capital gains during the resale of the various shares.

To limit the J cycle, some FCPR management companies sometimes sell quite quickly to generate initial capital gains.

A person investing in an FCPR must consider the following elements :

  • That take a risk during an investment in an FCPR is maximum. SRRI is 7 on a scale of 1 to 7. Concretely, the individual can lose his entire original investment.
  • The time scale investing in an FCPR is a decade.
  • The internal costs of administering an FCPR is relatively high, usually around 3%. They are due to the work and studies that need to be carried out to examine the various investment files, monitor investments and finally carry out disposals at the end of the life of the FCPR. For this it requires specialized teamsand you must pay them.

Good value for money recommend to a person of not invest more than 5 to 10% of the outstanding amount of his life insurance contract in the same FCPR. Nothing prevents a person from subscribing to units of different FCPRs in the same contract, but always being aware of the risk.

Good Value for Money brings in 2022/2023 a Sélection Espoir label to the FCPR PrimoPacte 2 by combining skills of three specialists in their field :

  • Eurazeo, which is one of the market benchmarks in terms of managing investments in unlisted companies,
  • Primonial, the leading private financial investment advisory group in the French market, as distributor of PrimoPacte 2 within its Target+ and PrimoPER contracts in their various versions,
  • Oradéa Vie, as a life insurance company that carries Target + and PrimoPER policies, highlights this company’s qualities both in terms of real estate savings and innovation.

PrimoPacte 2 being currently in the collection phase (see step 2), it is obviously impossible to predict its future performance. Open since July 18, 2022, this phase ends no later than June 14, 2024.

PrimoPacte 2 aims at an investment of approx. 150 mainly European SMEs and ETIs, with identified growth or development potential in their market.

The main advantages of PrimoPacte 2

  • The quality of Eurazeo / Primonial / Oradéa Vie triptych.
  • Targeted overall framework for the reasonable and coherent fund with market practice.
  • Prospects for good risk dilution for the saver.
  • Geographic investment area with a focus on Europe.
  • Good track record from the former FCPR, PrimoPacte.

The main disadvantages of PrimoPacte 2

  • Cost structure inherent in any FCPR.
  • Risk taking for investor inherent in any FCPR.
  • Uncertain economic outlook in Europe because of Ukraine.

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