FCPIs (French regulated mutual funds investing in innovative companies) are a variety
of FCPRs (French regulated mutual funds dedicated to private equity) that were created
in 1997 to encourage investment in innovative start-ups by offering attractive
tax breaks to individual investors.
More than EUR 4 bn have been invested by the investment management companies
in the last 10 years. This trend marked the development of "retail" access to
a new class of long-term asset: private equity.
Why invest in private equity?
Private equity is a generic term for the acquisition of equity participations
in unlisted companies at different stages of their development.
Its primary attraction is performance: private equity investments posted a higher
annual performance than all other asset class including the stock market over
the last ten-year.
Private equity is a completely different class of asset that allows optimal diversification
of portfolios of diversified long-term assets (10 years) and an optimisation of
the risk/return profile since the performance of investments in unlisted companies
is not directly correlated to the evolution of the main stock market indices.
How to invest
Investments in unlisted equity can be made via specialised mutual funds such
as FCPIs or FCPRs (French regulated mutual funds) or by investing directly in
the capital of a company or via a fund of funds.
The FCPI explained :
For individual investors, the FCPI in the most well-known private equity investment
vehicle in France, providing an opportunity to access the capital of companies
in the most dynamic sectors of the economy.
FCPIs are funds that are specialised on the venture capital market (financing
start-up technology companies). In effect, the FCPI status only applies to funds
that invest a minimum of 60% of their assets in innovative companies within the
European Union.
An FCPI is also a tax-deductible investment product since it entitles income
tax relief equivalent to 25% of the amount invested as well as full exemption
from capital gains tax on all FCPI units held for more than five years.
In 2008, Crédit Agricole Private Equity has launched a range of innovation funds (FCPIs) offering its customers the opportunity to cut their wealth tax and income tax
liability. The total tax break can be as much as 40% of the amount invested.
The FCPR explained :
Private equity investments can also be made via FCPRs (French regulated mutual
funds dedicated to private equity).
The most common form of FCPR is the fund of funds (FCPR of FCPRs) which offers
investors pre-defined allocations in terms of the different segments of private
equity, i.e. early stage (venture capital) ) and later stage (expansion capital
& buyout) and the geographical location of target companies.
Specialised FCPRs (focused exclusively on expansion capital and buyout) allow
individual investors to choose their preferred type of allocation and to adjust
the risk / return profile of their overall portfolio of unlisted shares.
The FCPR is an ideal investment vehicle from the point of view of investment
costs since it allows strict control of management costs (defined precisely in
the fund's rules and by-laws) that do not require specific pre-investment resources
(preliminary research reports, audits, etc.)
Business Angels :
A business angel is usually an industrialist or an entrepreneur who invests capital
directly and privately in nascent or very early-stage companies.
This type of investor is often motivated by a passion for technology and a taste
for risk since he/she usually has to bear considerable costs associated with project-viability
studies before any investment decision can be made.
Although there is usually very limited diversification within a business angel's
portfolio, the experience gained from each project is always stimulating and edifying.
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