The great fortunes could not be more fond of private equity. With the capital investment, they devote part of their capital to the repurchase or development of unlisted companies. Their objective: to create added value then sell the shares after a few years, with a considerable capital gain at stake.
Private equity, the first investment of great French fortunes
The French Association of Family Offices or AFFO publishes a barometer each year allowing you to have an overview of the choices of investments of the families and offices of management of heritage or great fortune in France. The data from this annual barometer indicate a growing enthusiasm among the richest for capital investment. 21% of them in fact favor private equity, including 12% via direct investments – up 1 point from the previous year – and 9% via funds.
Comes next real estate, an area in which invest 17% of large fortunes – including 15% in investment real estate et 2 % par le biais de sociétés civiles de real estate investment or SCPI. The people or entities that bet on listed shares remain numerous and represent 16% of large French fortunes – their share is however down 6 points compared to the previous year. Life insurance also continues to attract a significant share – 13%, a stable level – of the richest.
It is also interesting to note that the debt listed is up 2 points, with rates of 7%. An increase of 3 points is also observed for tangible assets such as forests, vineyards or agricultural land, with rates of 4%. There rise however, is limited to 1 point for unlisted debt and philanthropy.
The determining role of the Pacte law
The richest favor private equity because it pays off, especially since this form of investment takes advantage of the Pacte law. The text notably allows savers to house in their life insurance contract in units of account of AIFs or alternative investment funds. The professional funds of capital investment or FPCI are part of these FIAs. But to be able to accommodate them in a life insurance contract, they must be made up of at least unlisted securities – which represents a notable advance since previous legislation required 10% unlisted securities.
If some voices further highlight the fact that the Pacte law primarily benefits the wealthy – an argument that is partly justified since for a insurance contract can form half of an FIA, it is necessary to mobilize at least €100,000 – it is interesting to remember that the objective remains to direct savings in small businesses. In practice, private equity funds help unlisted companies with growth, transfer or recovery needs.
The level of performance of French private equity players
The performance French people and entities at the forefront of capital investment are promising. This is what emerges from the annual study carried out by France Invest and EY, which reports a net return of 11.2% over fifteen years and a performance level of around 10% since 2014. We note, year after year, that the level of performance of private equity French than that of all other long-term asset classes, explains Dominique Gaillard, president of France Invest. However, there are certain significant constraints. For example, it takes eight to ten years to be able to unblock operations. But if the funds of capital investment are poured into a life insurance contract, the insurer guarantees the liquidity of the said funds. In the event of the death of the insured, not only do the titles return by right to the heirs but these capital are exempt from costs of exit.
