The purpose of classic euro funds is to provide savers with guaranteed capital and liquidity in their savings at all times. (Photo credit: 123RF)
Classic euro funds, retirement, real estate, dynamic or even eurocroissance… the site GoodValueforMoney.eu analyzed the composition and financial performance of euro funds on the market at the end of 2021.
Classic Euro funds
Classic Euro funds are the “historic” life insurance funds: according to GoodValueforMoney.eu, they account for 88% of the total outstanding amount of Euro funds.
Their goal is to provide savers with guaranteed capital and liquidity of savings at all times. This is why they are primarily invested in low-risk and sufficiently liquid assets such as bonds.
According to Good Value for Money, at the end of 2021 they are composed on average of 77.6% bonds, 9.4% stocks and 6.8% real estate. The bond portfolio is of good quality with an average rating of A+.
The average financial return of these funds is estimated at 2.45% in 2021 after 2.23% in 2020, i.e. an increase of 0.22 points thanks to dynamic assets (equities, real estate, private equity, infrastructure, etc.)
Euro property funds
As the name suggests, the portion invested in real estate assets in a Euro property fund is larger than in a conventional Euro fund. The goal is to get a better return with moderate risk-taking.
At the end of 2021, the share of real estate represents an average of 35.1% of these funds’ assets, the rest is invested in bonds (52.1%) and shares (6.1%). The average rating of the bond portfolio is BBB+, lower than for conventional Euro funds.
The financial return over 2021 is estimated at 3.88%. Over the past five years (2017-2021 period), the average financial performance of Euro property funds has been better than that of conventional Euro funds: there is a difference of 1.44% (144 cents) in favor of Euro- real estate funds. This is explained by the performance of the assets in the property pocket, but also by the bond pocket. The higher the average grade, the lower the financial performance.
Life insurance companies voluntarily limit the development of these funds due to the very high cost of this asset class in terms of solvency margin. Moreover, over the years we have seen a lower relative exposure of these funds to real estate assets: it fell from 55.9% of assets at the end of 2014 to 35.1% at the end of 2021.
Dynamic euro funds
The principle of a dynamic euro fund is to expose itself to more risk in order to try to increase the financial results of the fund. On the other hand, the yield served is potentially less regular (it can sometimes be equal to 0%). In 2021, the average financial return for dynamic Euro funds is estimated at 2.41% (compared to 2.45% for classic Euro funds). On the other hand, over the past five years (period 2017-2021), dynamic funds have outperformed traditional Euro funds by 0.32% (32 cents) per year.
The share of shares is 15.1% on average in 2021, property assets 11.1% and bonds 62.7%. The average rating of bonds in dynamic Euro funds is slightly lower than traditional Euro funds with an average rating of A -.
Pension scheme euro funds
These are the funds in euros for individual pension contracts such as PER, PERP, Madelin or even Articles 39 and 83. They now account for 11% of the total outstanding funds in euros.
These funds benefit from a commitment from the saver over a long period (10 to 30 years), which allows them to seek greater returns. Their financial return is estimated at 2.97% in 2021. Over the last five years (2017-2021 period) they have generated an annual financial performance almost 0.50% (50 cents) higher than conventional Euro funds . because they benefit from a larger diversification pocket and a more aggressive bond pocket.
In fact, they consist on average of 69.1% bonds (average rating A), 17.6% stocks and 8.7% real estate.
The Eurocroissance fund is intended to be an alternative to the classic Euro fund: the capital is guaranteed only on the contractual maturity date agreed with the client (8 to 10 years most of the time). This is the reason why these funds are more heavily invested in shares (21.5%). The rest is divided into bonds (68.8%, average rating A -) and real estate (4.0%). In 2021, the average performance is 1.52%.
Source: Good Value for Money website specializing in personal insurance and financial investments