Thursday, December 1, 2022
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Unlisted mutual funds in their life insurance contract, is it a good idea to boost performance?

Unlisted, also called “private equity”, continues to proliferate in unit-linked life insurance contracts. According to France Invest, in 2021 it drained almost 4.8 billion euros through the life insurance channel, i.e. almost three times more than in 2020. For the record, this investment consists in buying shares in a fund consisting of capital shares (in the form of shares) in the capital of companies not listed on the stock exchange (start-ups, ETIs, SMEs). There are also variants: some funds specialize in infrastructure (bridges, wind farms) and others in private debt through holding bonds.

The private equity boom in life insurance was made possible by the Pacte Act of 2019. “This regulation removed the ceiling for the share of this asset in a life insurance contract, which until then was limited to 10%”, recalls Dominique Collot, marketing director at Suravenir.

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Subsequently, this investment in the real economy was democratized thanks to two “general public” fundraisers by BPI France as part of the recovery plan. According to the Good Value for Money site, around 15 hedge funds (FCPR, the legal shell in which private equity funds are placed) are currently referenced by around ten insurance companies.

Support a company in its growth

“There are two categories: ‘closed’ funds whose subscription period is limited in time with a result after ten years, and ‘perpetual’ funds with a life of ninety-nine or one hundred years, permanently open”. says Cyrille Chartier-Kastler, the founder of this site. Why choose private equity? “This investment has the advantage of being deco-related from the financial markets. Plus, it is likely to earn double-digit performance,” says Guillaume Lucchini, founding president of Scala Patrimoine. France Invest states that in the period 2007-2021, the non-listed had an average return of 12.2% per year, against 6.3% for real estate and 5.1% for the stock market. In addition, it allows you to take advantage of the privileged taxation of life insurance if you throw an unlisted share into units of account.

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First of all, private equity done directly is not a liquid investment because it is a firm commitment to hold unlisted shares in a company over a long period of time to support it in its growth. “However, in connection with life insurance, this liquidity is partially made available by the insurance company”, says Valentin Pillet, head of private equity at Neuflize OBC. In case of early resale of the shares, the individual will be reimbursed in cash and/or securities. However, this policy varies depending on the companies with sometimes additional costs.

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