do you have any interest in betting on this booming investment which can yield more than 12%?

Six zeros. Even seven. It was impossible, a few years ago, to invest in private equity for less than that. But times are changing. And this asset class, once reserved for institutional investors, is now open to individuals. With, the key, often spectacular yields.

This is one of the flagship investments of the year. In the first half of 2022, French private equity players collected more than 21 billion euros. Subscribers include, unsurprisingly, pension funds, pension funds and insurance companies. But also, more and more, individuals.

They have invested more than 1.9 billion euros during the first 6 months of the year, according to France Invest. That is 14% more than the same period in 2021. Result? Individuals and family offices, who manage large private fortunes, now represent 12% total subscriptions. Never seen.

But why such a street towards private equity? As a reminder, private equity, or capital investment, is an asset class in its own right. This investment consists of taking a stake in the capital of companies not listed on the stock exchange in the hope of realizing a capital gain when reselling the shares.

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Low liquidity

This investment is not without risk. Far from it. Private equity is a bet on the future. Depending on the case, the investor finances the launch of a company, its development or its transmission. Gold 90% startups go bankrupt, including 10% from the first year, recalls Claude Calmon, founder of the fundraising consulting firm Calmon Partners

Another drawback of this investment: its lack of liquidity. When you invest in private equity, your funds are often locked up for 8 10 years, explains Frdric Stolar, managing partner at Altaroc. These are long-term investments, because companies have to be given time to invest this money in order to develop.

It is therefore not surprising that this asset class has long been reserved for institutional investors only. Private equity has been around for over 50 years. But we are just beginning to hear about this investment universe among individuals, confirms Frdric Stolar.

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Record yields

What has changed? Over the past 10 years, the investments to which individuals used to turn have lost their luster, believes Frdric Stolar. Risk-free investments, such as euro funds, saw their average return plummet to 1.3% in 2021. As for the equity markets, they offer the advantage of liquidity but are extremely volatile.

By contrast, private equity is posting record performances and a certain stability. Over the past 15 years, this asset class has yielded 12.2% per year, according to the association France Invest. And again, this is just an average. The best funds reach up to 25% yield per year, specifies Frdric Stolar.

Figures that make you dizzy. By way of comparison, the CAC40, the flagship index of the Paris market, generated an annual performance of 5.1% between 2007 and 2021. Still according to France Invest, the average yields of real estate would have reached 6.3% per year over this same period. That’s almost twice as much.

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Ticket 25 euros

Inevitably, private equity arouses the curiosity of private investors in search of yield. Especially since with the entry into force of the Pacte law in 2019, individuals can now invest up to 50% of their life insurance contract in private equity funds.

To meet demand, more and more insurers are now referencing private equity funds. Among them, the fintech Yomoni, which, in partnership with Altaroc, has recently offered its clients the opportunity to invest in private equity. To subscribe, however, you will have to show your credentials: the entry ticket is fixed 100000 euros and you must have financial assets (excluding real estate) of more than 500,000 euros.

Does that seem substantial to you? However, a few years ago, subscribing to shares in a private equity fund for such an amount would have been (almost) impossible. Previously, I grease a fund with 1 billion euros outstanding. My smallest client weighed 15million euros and we had more requests than places in our funds, remembers Frdric Stolar.

But times are changing. And private equity is now opening up to a wider audience. The online bank Boursorama Banque, for example, has just launched a new 100% digital private equity offer. Accessible from 25 eurosthe latter can be taken out via the Boursorama Vie life insurance policy, a securities account or a PEA-PME.

Boursorama launches a new private equity offer accessible from 25 euros

Bad funds

A ticket between 25 euros, it’s unheard of. However, it remains to be seen whether the performance will be there. Will you really reach 12.2% yield per year? Nothing is certain. Because very often, the best-performing private equity funds remain reserved for institutional clients.

Most private equity funds do not know how to manage the operational and regulatory complexity of individuals, confirms Frdric Stolar. These funds are used to managing 30 50 large institutional clients. Consequently, they do not have the necessary infrastructure to take care of 10000 private customers.

And if certain funds are open to individuals, it is not always by choice. Funds with average performance are finding it increasingly difficult to raise money from large institutions. Result: part of these funds are now turning, by default, to private clients, warns Frdric Stolar.

To find out which funds to select, take a look at their managers. Have they managed renowned funds before? What results did they get? Are they investing alongside their clients? Also consider diversifying your portfolio. And as with any risky investment, only invest money that you can afford to lose.

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