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Publication of the first study on the performance of unlisted financial asset funds aimed at non-professional clients
29 January 2025

Publication of the first study on the performance of unlisted financial asset funds aimed at non-professional clients

Background

Unlisted financial asset funds, including private equity and private debt, but excluding real estate funds, were historically reserved for institutional investors and wealthy individuals. However, these funds are now being offered to a wider audience, including retail investors, often while highlighting their contribution to the real economy and their past performance. Since 2017, the outstanding amounts of unlisted asset funds aimed at the general public has increased considerably, particularly for retail private equity investment funds (FCPRs), even though the oldest types of funds aimed at individuals, FCPIs and FIPs, have seen a fall in their inflows.  For example, the assets under management of FCPRs, excluding tax funds, rose from €628 million as at 31 December 2017 to €9,200 million as at 31 December 2024. This trend is set to continue, thanks to French and European initiatives aimed at improving retail access to these types of investment. The AMF wishes to ensure that clear and accurate information is provided about the historical performance of these funds, while reminding investors that this historical performance is no guarantee of future performance.

Content of the study

The study presents an overview of French unlisted financial asset funds aimed at retail clients, detailing their historical performance and analysing various quantitative indicators. This is the first study carried out on the French market with such historical depth and this scope. It encompasses all legal categories of unlisted asset funds, with the exception of real estate funds, and provides an analysis of the performance of both live and liquidated funds up to the end of 2023. ELTIF funds, whose framework changed radically at the very beginning of 2024, were not specifically examined in this study. The study also examines the fees charged on these funds.

Heterogeneous performance of live funds as at 31 December 2023

The performance of unlisted financial asset funds varies greatly depending on the legal category and specific characteristics of the fund. For example, the median Internal Rate of Return (IRR) for retail investment funds investing in local companies (FIPs) is -2.4%, the median IRR for retail investment funds investing in innovation (FCPIs) is -1.1%, while ‘Evergreen’ (open to redemption) FCPRs post a higher median performance (5%) - albeit with a short track record that does not provide a reliable view of their long-term performance. These latter generate returns mainly driven by the valuation of unlisted financial assets.

Finally, on a broader scale, these performance indicators remain significantly lower than the average historical performance of funds reserved for professional clients - mainly due to the latter using progressive capital calls. In addition, the effective performance attained by retail clients when funds are marketed in unit-linked life insurance contracts must also consider the management fees of life insurance contracts, which are added to the fees levied by the funds themselves, thereby reducing the net performance for the investor.

Risks associated with liquidated funds

An analysis of funds that have been liquidated, mainly FIPs and FCPIs, shows a decline in returns as the funds approach liquidation. This can be explained by difficulties in selling the assets at the end of their life cycle, thereby reducing investors' returns. The bankruptcy of certain portfolio undertakings can also lead to significant losses. This situation highlights the risky nature of investments in funds invested in unlisted assets, despite the fact that their volatility (the usual measure of risk) is generally lower than that of funds invested in listed companies due to the frequency and valuation methods used.

Analysis of unlisted asset fund fees

FIP and FCPI funds have the highest fees (3.5% and 3.2% per annum respectively), while other general public funds have annual fees ranging from 2.4% to 2.7% per annum. These fees do not take into account additional fees related to distribution, such as those for life insurance contracts, which may increase the overall fees for investors, as well as the fund entry fees. Apart from funds with high performance and fees due to carried interest, the study found no material link between the level of fees and fund performance.

Special features to be mentioned when marketing

This study shows that the performance of unlisted financial asset funds differs significantly depending on their legal category and their characteristics: open/closed to redemptions, progressive/single capital call, direct/indirect (trough fund shares) investments, amount of fees, etc. Based on this information, the AMF stresses that the marketing pitch and materials used when marketing unlisted financial asset funds to non-professional  clients must take account of their specific characteristics in terms of the fund's investment policy, capital calls and distribution, as well as the fees associated with the share being marketed. In particular, the performance of unlisted financial asset funds aimed at retail clients cannot be likened by default to the historical performance of professional funds, which have different characteristics.

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