Life insurance: the right financial supports to put the turbo

A few years ago, advisors often had a ready-made answer to savers wishing to diversify their life insurance: bet on a heritage fund, like Eurose or Carmignac Patrimoine. The latter have also fulfilled their mission rather well, generating a higher return than the fund in euros with controlled risk. But things have changed. First, the market environment, marked by very low interest rates, is less favourable. Then, the offer was significantly enriched within the contracts. In addition to real estate supports, there is a rich and renewed range of financial supports to explore.

1/ The funds of pprivate equity

Traditionally, one finds in life insurance contracts supports allowing to invest in a basket of shares or bonds listed on the stock exchange. But, recently, new types of funds are developing: they target unlisted companies. They can invest in the capital of the companies mentioned (private equity) or lend them money (private debt funds). Historically reserved for professional investors, these products are now available to the general public through life insurance. The interest? First their performance prospects. The unlisted offers the best long-term potential. The France Invest association assesses the annual performance generated by private equity between 2006 and 2020 at 11.7%. of the contract. They also bear significant costs. Expecting a return of 5 to 6% per year seems more realistic. There are different strategies, and some aim to do better, like Apeo (Apax Private Equity Opportunities) from Apax. This product targets a specific part of the private equity what is the transmission capital (sale of the company), which allows it to aim for a return of 8 to 12% per year.

Please note that some of these products are blocked for several years. Others provide for the possibility of going out at regular intervals. “It should nevertheless be considered as a long-term investment, because it takes at least five years to benefit from the value creation of the fund”, estimates Guillaume Cousseran, associate director responsible for investor relations at Apax. Indeed, the performance of private equity is not linear: the first years are generally weak, before taking off thereafter.

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In any case, these funds must be considered as diversification products, for 10% to 15% of its assets at most. “And it is better to diversify into three or four funds when possible,” recommends Philippe Gourdelier, co-founder of Patrimea. Note that, depending on the insurers, the entry ticket can be limited to 1000 euros or amount to several tens of thousands of euros.

Another approach, for the MACSF, which has chosen to promote private debt support, built with Tikehau capital. “We wanted to have an offer of the same nature as the other units of account: liquid, transparent and accessible, explains Roger Caniard, financial director of the MACSF. The enormous advantage of debt is that it quickly generates the payment of interest and repayments, which provides liquidity and allows savers to make redemptions at any time. Over the first year, the profitability is slightly less than 6% net of fees.” At the mutual, this unit of account is particularly popular with customers who do not wish to be exposed to the stock market. “It is possible to put up to 30% in your contract to diversify without suffering the volatility of the financial markets,” said Roger Caniard.

Infographics

Infographics

Dario Ingiusto / L’Express

2/ Structured products

After a lean period, structured products have returned to center stage. Their promise: to make you benefit from part of the rise in the stock market, while protecting you against the fall of the markets.

The most commonly issued are autocalls. Their lifespan is determined in advance, and their performance depends on the behavior of a market index (the Euro Stoxx for example). If the latter is up on the anniversary date of the product, then a fixed coupon is paid to you (of 4, 6 or 10% depending on the product), regardless of the progress of the index. This usually results in the prepayment of the product. Some even provide for the payment of a gain as long as the index does not lose more than a few points. At maturity, if the product has not been repaid, you fully recover your capital as long as the index has not lost more than a certain value (generally between 40% and 60%). On the other hand, beyond that, you bear the entire loss. Many variations and options exist around this general principle.

These products generally appeal to a public fearful of the vagaries of the stock market. “We offer structured products in all our contracts, says Stefan de Quelen, Managing Director of Meilleurtaux Placement. Clients are worried about the fund’s lower return in euros, but they find that the stock markets are expensive. Capital protection at maturity helps them take the step of diversification.” But pay attention to the details. It is indeed necessary to understand all the parameters of the product, not the only promise of return, via the coupon served. The level of capital protection at maturity (in which situations will it be returned to you in full?) and all the options to limit the risk are also to be taken into account.

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Infographics

Dario Ingiusto / L’Express

3/ The exchange-traded funds (AND F)

In a classic fund, the manager chooses the shares he puts into it. Not in so-called ETF funds or trackers, which themselves invest in the same securities as their benchmark index (CAC 40, SBF 120, etc.). An ETF that replicates the CAC 40, for example, will invest in LVMH, Sanofi, Renault…, in other words, in all the companies that make up the CAC 40 and in the same proportion. Because of this “passive” management, ETFs have much lower fees than actively managed funds. They have a triple interest: they are inexpensive, simple, and allow you to invest anywhere.

Their performance will stick to that of the replicated index, both up and down, if the CAC 40 is +5%, the ETF will also be +5%. No surprise! “ETFs above all offer the advantage of being able to target a very large number of companies with a limited stake, estimates Alexis Naacke, director of management at Yomoni. an ETF replicating the MSCI All Country World Index (ACWI), the largest existing index.” While live, for example, you have to count not far from 3000 euros just to buy an Amazon share…

Before choosing a fund, first check what’s in it, as the denominations are rarely self-explanatory. What does the iShares Core Global Aggregate Bond UCITS ETF actually cover? The market for good quality international bonds, but it’s not… intuitive!

Another precaution, ETFs are pure products. Unlike traditional funds, there is no ETF that combines stocks and bonds in the same product. “This is a building block for building an asset allocation, says Alexis Naacke. You must therefore first know in which geographical areas or sectors you want to invest before choosing your instruments.”

How to use ETFs within your contract? They can replace classic backgrounds or be combined with them. “In this case, ETFs will be used for the core of the portfolio, and we will seek actively managed satellite funds to bet on very specific themes or to invest in decorrelated products such as real estate supports or structured products, details Alexis Naacke. This steering wheel of satellite products must not, however, exceed 20% of the total.”

Infographics

Infographics

Dario Ingiusto / L’Express

4/ Thematic funds

The principle of thematic units of account is as follows: the manager concentrates on a long-term trend, promising growth, and he targets companies likely to benefit from it. For example, a fund on the theme of the aging population will bet on companies in the health sector, but also leisure and financial services… Depending on the case and the theme chosen, these funds can be very diversified, because they will operate in many sectors of activity, or else be much more specialized. This will be the case, for example, of a fund on the theme of space. It is then necessary to invest in small doses, because the movements can be violent. These products are very successful. “Thematic funds work well because they are products that are easy to explain, clients understand what they are investing in, explains Philippe Gourdelier. Among the most popular themes are water, nutrition, the elderly or energy renewable.”


The Express

Another success factor: very satisfactory past performances. “This is particularly valid on certain themes such as artificial intelligence and technology in general, underlines Tommy Pierre Pollet, head of Selexium’s financial offer. These funds have corrected quite a bit lately on the stock market, which offers interesting entry points. In the absence of precise convictions, it is possible to turn to products combining several themes. “There are megatrend funds that do this work for savers to seek out several promising themes, explains Tommy Pierre Pollet. With the same amount invested, these products provide better diversification.” Perfect for small estates.


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Life insurance: the right financial supports to put the turbo


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