“How to invest in private equity with life insurance?”

By Souleymane-Jean Galadima, CEO of Alphacap.

An essential tool for diversification and performance, private equity represented, in 2019, 21% of investments by wealthy families according to the French family office association. Existing in several forms, private equity allows an investor to invest capital, directly or via a fund, in the capital of a company. Whether it is development capital to finance a profitable company in full growth or turnaround capital to help a company in difficulty, it remains a mode of investment committed to the future of a company. .

Since 2016, following the Macron Law of August 6, 2015, the first life insurance contracts have had the possibility of being invested in private equity. With indisputable advantages. The minimum investment was considerably reduced to reach €1000 access threshold, the liquidity provided by insurance companies allows to resell its shares held at any time. But it is above all the inheritance and tax advantages of life insurance, applied to capital gains that are the most attractive, especially once associated with the strong performance potential over the long term. Despite a limited quality offer, generally high fees and the associated risk, this diversification option is becoming increasingly popular. Its decorrelation from stock markets is also a significant advantage, especially given the volatility of recent years.

Ardian, Apax, and BPIFrance, for example, already offer numerous private equity investment solutions eligible for life insurance. Despite a synthetic risk and return indicator between 6 and 7, these funds have met with great success, as evidenced by that of BPIFrance, which, at the start of the year, opened its second vintage with a reduced ticket.

Certainly the advantages of life insurance are numerous and recognized, but why have we observed since 2015 a strong interest of investors for Luxembourg life insurance?

This situation is simply explained by the very strict regulatory framework governing life insurance and assets in Luxembourg. First, the triangle of security and the super privilege which guarantee a protection regime for the sums of money invested and make the subscriber a privileged creditor. Secondly, tax neutrality is very advantageous for expatriates because they benefit from the taxation of their country of origin. Third, the possibility of investing in all classes of listed assets (live securities, ETFs, UCITS) and unlisted (private-equity, real estate, private debt, infrastructure). Unfortunately, entry tickets are generally over €250,000, which explains the interest of large fortunes in this practice.

​Finally, France Invest, the professional organization of private equity, projects 10 billion euros in annual inflows from individual investors within five years, in particular via life insurance, retirement and employee savings, against 1.5 billion euros in 2020.

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