This ration investment sighs one expert

Your money here. "This slogan popularized in the 1970s by the BNP now perfectly applies to relations between investment companies and insurance companies. "We accompany the insurers in the most efficient manner possible." "And to do this, we adopt a proactive approach," says Dominique Nicolas, Secretary-General of the Afic. In fact, every three months, representatives of this professional organization that brings together very sharp management companies investing the money was entrusted them in non-listed companies meet with those of the French Federation of insurance (FFSA) companies. Until recently, insurers were considered to be hesitant, or recalcitrant. But, under pressure, the profession has promised two years ago in Nicolas Sarkozy, then Minister for the economy, to "strengthen substantially its investment in shares of SMEs to growth, including innovative SMEs, not listed or traded on a non-regulated market Editor's Note: type Alternext." At the same time, the regulation of insurance has been relaxed to facilitate things.

Quarrel of figures

According to the statements of the FFSA, the promise to invest 6 additional billion by end of 2007 is already completed (see chart). And that 2 of the assets-to the share of capital raised for these SMEs remains, although that extended over time. The justification of the insurers They left in September 2003 of 0.8, and not of 1.4 as the left think the administration statistics... "The risk would be to disrupt the market by a too rapid capital inflows." "This does not contribute to structuring the investment in France for the benefit of the companies", argues Philippe Trainar, Director of the economic, financial and International Affairs to the FFSA. Much of the 15 billion euros of investments identified by the Federation has been invested in direct, but growth will also come from holdings in funds or funds of funds. In fact, the quarrel on the figures highlighted the features of these investments for the profession.

To begin with, the commitment of the FFSA in reality concerns the venture capital, development capital and the "LBO" (company leveraged buy-outs). Is limited so not to venture capital, finance business start-up, or French or owned companies innovative. This seems the best solution for many institutional investors, who remain convinced that it is not the capital that are missing from the French venture, but well packaged files. Not to mention that other forms of intervention, they also demonstrated their usefulness. "The LBO have created many jobs over the past 20 years in our country and they will enable a generation of entrepreneurs to their estate," notes André Renaudin, President of the world group.

The selection, critical issue

While covering a broad "class" of assets, the target of the non-coté "private equity" in English is not part of "knowledge - invest" traditional insurers, in stocks and bonds traded. The investment is an activity in itself. "It is a profession of big players, with industrial players and rules to meet," said Vincent Gombault, AXA Private equity. There are about 6,000 teams of fund management in the world, whose performance is highly variable. "Managing risk" therefore plays strongly, and the selection is critical for the investor, who can only get out for years and takes the risk of losing all his. Hence the transparency required of the Afic by insurers. So because of the incentive mechanisms applied to its managers, capital investment continued to suffer an image of strong greed. "In France, despite the efforts of the profession, too many teams still speak in raw performance, commissions and failures, which has no interest." "This ration investment," sighs one expert.

In fact, insurers are differently according to their profile. "Given our size, we're investing in funds of funds." "In this way, we delegate to third parties competent choice of teams and funds that invest in companies", explains André Renaudin, President of the world. And the Director of the investment, Antoine Hennequin, to clarify: "to select these breeders, our first test is the sustainability of the structure, and the second the professionalism of the teams."

The largest groups of French assurances, they have a long experience in this field. AXA, AGF or Groupama have subsidiaries or specialized departments who work as well for insurers in the group, including selecting funds managed externally, for other investors. Ditto for a "bancassureur" as the Crédit Agricole, whose subsidiary Predica became in a few years France second life insurer. A study had shown that "private equity" investment would need to hire multiple specialists internally. A mandate was therefore entrusted to CAAM Capital Investors for the management of its funds and CA Private Equity funds for the management of funds in which the company invests online. "This kind of investment has the particularity to represent a very heavy work upstream to select funds, but downstream, for monitoring of valuation and reporting of entries"

Another example, the Italian insurer Generali, which "private equity" skills centre, based in Cologne, selects records with the assistance of external advice. But the final decision rests in the Investments Committee for this purpose, said Philippe Lepargneur, CEO of Generali Finance.

Each retains indeed the upper hand on the allocation of assets. "Everything depends on the liabilities each insurer, its tolerance for risk and profitability objectives." "That being the case, there are methodologies to implement", notes Jean-François Bay, the CEO of Seeds Finance, a consulting firm. Insurers feel accountable for proper adjustment between the assets and liabilities in their balance sheets, knowing that sometimes (associations type Afer, contracts in the unit accounts as the NSK for investments at risk...), the investor has his say. "Our decisions must remain consistent with economic reality." Do not forget that most of our life insurance contracts are redeemable by the insured. "We have a liquidity constraint," warns Joël Prohin, in the direction of the AGF investments.

Close look, life is now three-quarters of assets managed by the profession, but only half of those invested in the non-coté. "Do not assimilate the life insurance of our country at foreign pension funds, which the horizon is much more distant." "Actually, our longest liabilities are in the field insurance non-life, disability or under construction, for example", explains Philippe Trainar. The auto and housing portfolios, their amount may be partly invested in shares because the essence of the contract is renewed each year.

"A slow cultural development".

In this search for the correct dosage, the time factor is considered crucial. "The main drawback of the"private equity"is its low liquidity." It is balanced by a number of advantages in legibility, visibility and performance, also decrypts Bertrand Poupart-Lafarge, Director of investments for AXA France. Emphasis should be placed on the importance of the construction of the portfolio over the long term. "It seeks to diversify the"vintages"to smooth out the economic cycle and stages of development (venture capital, capitaldéveloppement, LBO, large LBO... way), just as it varies the geographical areas. Start gradually helps mitigate the effect of the "J-curve". What is it The investor immediately fulfils the fees and commissions and therefore begins with wipe losses, except to already have a mattress of capital gains. Clear step, especially life insurers, whose collection depends on the rate displayed each year (including the participation of insured persons to benefits).

Prudent, the FFSA also took a global commitment, not company by company. This, the insurers would have to invested in the non-coté "for the purpose of diversification of the Pocket actions", as explained by Pierrick Louis in Pacifica, a subsidiary of insurance-damage of Credit Agricole. Because the "private equity" is correlated to shares but not to stock indexes. "Many institutional investors are interested in this area because of its outperformance to the quoted shares," reflects Agnès Nahum, one of the founders of Access Capital Partners, an independent fund of funds Manager. This was not always the case. "Until in 1997 - 1998, most European investors were absent from the"private equity", except the English and the Dutch." Others then came, Scandinavian, German, Swiss. "The French followed with a bit of delay," said Antoine Dréan, Triago founder, a fundraising consulting firm. "There is a slow cultural development," observed its side Yves Delacour, founder of Leonardo Finance, a network of support to start-up, while regretting that our country has more pros of venture capital.

In fact, since 2000, the collapse of the dot-com bubble and low long-term interest rates whetted the appetite for capital development. But European venture capital, he has just come out of five years of belt-tightening. "The curve of the internal rate of return (IRR) goes back and could cross the LBO funds in the future." "This is likely to revive investors," says Christophe Chausson, specialist in the raising of capital for start-up companies. Because officials do not want to deceive pace, at the risk of overpay assets. "I am not sure to envy that it rushes to invest in the non-coté while, it seems, we are at the top of cycle, or to accept either the State which imposes it, while it is private savings," considers Bénédicte Coste, President of the Afer, which invests for the moment and shares listed.

In any case, entrepreneurs will have to wait long to receive all of the money retained by insurers, because it takes several years to be invested by the Fund. And the bulk of this windfall will go to the most popular management companies. It is also likely that dialogue between insurance companies and the investment specialists will continue because, while a Fund of partly public funds will be created in the program "France Gazelles", project of the insurance Solvency II directive may penalize unlisted investments. It has also not escaped the "proactive" Afic, Member of the European network of venture capital...