Private equity has been very popular among investors in recent years (cf. savers enticed by private investment, euro growth and discretionary management. Investing in non-listed companies by participating in their development with a view to a capital gain exit is widely attractive) . .Historical performance of private equity funds has made their reputation, and now the choice of investors at the entrance is no longer entirely relevant.
Private equity for all? From a few hundred euros…
No, you don’t have to mix everything. Private Equity or capital investments are investments subject to the risk of capital loss. Investment limits, regulated for the general public, are imposed on depositors to protect them. The returns posted in private equity (averaging 11% in 2021) may encourage the most greedy savers to invest irrational amounts given their financial health.
From now on, it is possible to invest in private capital from 1,000 euros, and sometimes even less. No more entrance tickets for at least 100,000 euros, with the exception of a few management company funds, the main target of which remains wealthy investors. Investing in private equity through life insurance is now possible for all risk-averse investors.
Private equity in life insurance, the best of both worlds
As with SCPI, life insurance should be the best vehicle for holding private equity funds. Life insurance allows you to limit the significant risk of illiquidity of securities. In life insurance, the depositor has to deal only with the insurer of his contract. Thus, he can ask him at any time, but sometimes with penalties, to redeem his investment. However, private capital, like SCPI, is a long-term investment of the order of ten years.
Choosing Private Equity Funds
Private equity in life insurance, regulated caps : To protect depositors from the risk of capital loss, private equity investments cannot exceed 50% of the outstanding amount for life insurance contracts of more than EUR 100,000 and 10% of the outstanding amount for contracts with an outstanding amount of less than EUR 100,000. (Order No. 2019-1172 dated 11/14/2019 – JORF No. 0265 dated 11/15/2019).
Private Equity / Capital-Investment: investments with multiple risks
- Risk of capital loss A: The fund is not a guaranteed capital fund. Therefore, it is possible that the initially invested capital will not be returned.
- Liquidity risk of the Fund’s assets Note: Because the Fund primarily invests in unlisted Retirement Funds, which themselves primarily invest in unlisted companies, the securities it holds are not very liquid or illiquid.
- Investment value risk : The Transferred Funds will be contributed to the Fund in an amount determined by one or more independent third party purchasers along with the Fund tranche of the Transferred Funds. As set out in more detail in the Rules, this value may not reflect the net asset value of units or shares of the Funds Transferred. In addition, the Transferred Funds are contributed to the Fund in the amount that was determined after the Covid-19 crisis and therefore includes an assessment of the impact of the latter. This value of the contribution does not necessarily reflect the net asset value of the units or shares of the Funds Transferred. Moreover, it cannot be ruled out that the Independent Third Party(ies) have overstated this estimate and that it does not reflect the future value of the Funds Transferred.
- Fund management report risk : Given the number of assets in which the Fund will invest indirectly, the Fund’s management report may not detail all of these assets in order to provide investors with information that the Management Company considers understandable to any investor, and this is in accordance with the rules, in particular with regard to the composition assets.
- Risk associated with the Fund’s confidentiality obligations : The Transfer Funds and the Management Company are bound by confidentiality obligations regarding the information they receive from the Transfer Funds. These obligations must be assumed by the Fund when depositing the Transferred funds to the Fund. The confidentiality obligations of the Fund and its Management Company may limit the information disclosed to unit holders in accordance with Commission Regulation (EU) No 231/2013 of December 19, 2012 delegated and Article 421-35 of the RGAMF.
- The risk of a material difference between the market value of the portfolio and the subscription price : The attention of subscribers is drawn to the possible decorrelation between the market value of the portfolio and the subscription cost.
Financial Markets / Risk Warning : Investing involves risk. By investing in financial markets, you may lose all or part of your capital. We recommend that you only invest in financial products that match your knowledge and experience. Past results do not prejudge future results, they are not constant over time and are in no way a guarantee of future results or capital.
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