why eurocroissance outperforms funds in euros

Life insurance funds promising you to recover your investment and whose financial returns are two or even three times better than the average fund in euros? Yes, there is: eurocroissance funds have had a good year in 2021. But beware of hasty conclusions: their operation is totally different from a fund in euros.

Is the tide turning for eurocroissance funds? Family of funds launched in 2014 from the ashes of euro-diversified funds, announced by the then tenant of Bercy, Pierre Moscovici, as the 3rd pillar of life insurance… they suffered from the low interest rate environment. Their performances never really took off. And so they never really won over savers. The 2014 version of the eurocroissance funds have not met with the expected success, confirms today the Cercle de l’Epargne in its monthly letter. At the end of 2020, eurocroissance weighs 3.3 billion euros: on the scale of more than 1800 billion euros in life insurance, this remains a drop of water. The Pacte law came to offer a major facelift to these funds, with more flexible management.

Sign of a change in trend, or at least that Eurocroissance is of interest or attraction: even web brokers – who offer life insurance at reduced costs – are getting started. Spirica, which manages the BforBank Vie, Meilleurtaux Libert Vie and Linxea Spirit 2 contracts, among others, has launched Growth Allocation Long Term, a eurocroissance fund in the Pacte law version, which is not available on the BforBank online banking contract but is offered on the life insurance policies of Spirica’s main partner web brokers. In the same way, Altaprofits, pioneer of web brokers, is also converting to new generation eurocroissance by launching in February 2022 with Generali the fund Generations Sustainable growth: too young, however, to appear in the following table, which lists the known performances for eurocroissance in 2021.

2020 and 2021 performance of growth and eurocroissance funds
Fund (and insurer) Performance 2020 Performance 2021
Growth Allocation Long Term (Spirica) 4.88%
G Growth 2014 (Generali) 3.72% 3.21%
Agipi eurocroissance (Axa France) 3.10% 3.10%
G Growth 2020 (Generali) 3.01%
Growth Fund (Axa France) 2.60% 3%
Eurocroissance Project/Retirement (BNP Paribas Cardif) 0.27% 2.51%
Eurocroissance Patrimoine (BNP Paribas Cardif) -1.18% 1.30%
Afer eurocroissance (Abeille Assurances, formerly Aviva) 2.42% -0.14%

Performance net of contract management fees.

Sources: communications from insurers and Goodvalueformoney.eu

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Analyzing the performance of growth or eurocroissance funds is tricky! The top of the class, Croissance Allocation Long Terme de Spirica, ridicules the competition by flirting with the 5%? Not so fast… This fund was launched in September 2020. However, any eurocroissance fund must prove itself over several years. The Afer eurocroissance fund, for example, had a remarkable year in 2019, financially speaking, with an increase of 13.33%… followed by 2.42% in 2020 and therefore a negative return in 2021.

Axa’s eurocroissance shows more linear performances, comments Cyrille Chartier-Kastler, founder of Goodvalueformoney.eu. This reflects two different financial strategies. This also probably reflects the fact of having wanted to quickly reach high figures on the Afer side, which implies higher volatility. How to explain a poor performance in 2021 when the stock markets have reached peaks? The diversification pocket must be well invested. Like partial guarantee funds in euros, financial management is more dynamic, so there is a risk of making a mistake!

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The France Assureurs federation has not yet delivered the average returns for eurocroissance in 2021, but recent history illustrates this instability well: +6.5% in 2019 and +0.1% in 2020.

Capital guaranteed… partly… after 8 years

Above all, be careful not to confuse a eurocroissance fund with a fund in euros! The latter guarantees you to recover your capital – 100% or almost 100% – at any time. Eurocroissance only guarantees that you will get back your bet at the chance chosen when you invest in this fund, and this chance cannot be less 8 years. And again: when insurers or distributors announce a growth fund and not a eurocroissance fund, this means that they only offer you a partial capital guarantee, for example 80% of your initial investment after 8 years. It is thanks to this risk and this long-term bet that insurers manage to achieve better financial performance than on funds in euros.

The new version of eurocroissance, following the Pacte law, at least makes the operation more readable: With this formula, subscribers have Eurocroissance fund units, whose value changes from year to year, explains Philippe Crevel, director of the Cercle de l’Epargne, in his monthly letter. The reported annual return corresponds to the financial performance of this fund. Unlike old-generation eurocroissance funds, this return is therefore the same for all unitholders, as is already the case for unit-linked vehicles.

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Cyrille Chartier-Kastler, from Good value for money, warns of the risk of confusion when reading eurocroissance rates for 2021: Caution: the annual performance of a eurocroissance fund is not a return paid to policyholders, but only the financial performance of the fund! It is not an annual return paid out each year as on a fund in euros. And you have to maintain the investment for 8, 10 or 15 years…

The good performance of eurocroissance in 2021 is totally correlated with the good performance of the financial markets, warns Cyrille Chartier-Kastler. These funds have a non-negligible proportion of equities: it is therefore logical that their performance should be favorable in 2021. 2021: The past year was very favorable and 2022 will be more complicatedfor eurocroissance as well as for life insurance as a whole.

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