The profitability of the equity loan fund will remain limited

A patriotic gesture. Now that the details of equity loans are a little better known, investors are less dreaming of it. Their vocation remains above all to finance the French economic fabric, and, in the opinion of all the stakeholders who have worked there, this is a good thing. But their real usefulness from the point of view of their yield remains to be demonstrated because this should not exceed 2% for the final investor.

During the presentation of BNP Paribas Cardif’s results, Renaud Dumora, CEO of BNP Paribas Cardif, explained that if companies could finance themselves at a rate between 4 and 5.5% for SMEs and at a higher rate for medium-sized companies, this will not correspond to the final return of the equity loan fund. “It will be necessary to withdraw the State guarantee, which is not free, and it will cost between 0.9 and 1.8%”, explains the leader. “There will remain about 2% of performance for the investor”, he continues.

Difficult to house
in units of account

With risk-free rates close to zero, this return may certainly appear attractive, but it remains far from those offered by equivalent asset classes – not however benefiting from any guarantee. In addition, the fund may not a priori be subject to independent units of account. It will therefore be diluted in the general assets of the fund in euros. What Renaud Dumora has confirmed. “I am skeptical about the ability of insurers to put it in a unit of account”, did he declare.

He was still very enthusiastic about these products. According to him, “Equity loans come at the right time”. Cardif could thus, according to the manager, invest up to one billion euros in this product, if their entire envelope of 14 billion is used (another 6 billion being dedicated to the Relance bonds which will be subscribed by funds).

However, for Cardif, as for other insurers, the prudential treatment of these products will remain decisive for their success. Because if the governance issues are almost complete, with an umbrella manager and several managers backed by banks to supply this market fund, its prudential treatment has not yet been set. On this point, Renaud Dumora believes that “The ACPR should provide very favorable prudential treatment, which takes into account the risk characteristics [et donc la garantie] of these assets. The Solvency II shock should be extremely reduced ”, with a treatment close to that of government bonds.

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