Risk Mutual Investment Fund [ FCPR ] : Operation, Advantages
Wanting to invest capital in the hope of realizing a capital gain and taking advantage of the tax exemption is a good strategy. To do this, the Venture Mutual Fund can meet your expectations. Investing the majority of its capital in small and medium-sized companies with unlisted shares, which is moreover in sectors of innovation or proximity, offers interesting advantages. We explain to you.
What is a venture capital fund?
A venture capital mutual fund (FCPR) is a collective investment fund open to individuals, shared between several investors. This investment fund forms an organization that invests capital in business projects. The FCPR is a bit like a co-ownership of transferable securities, which is part of the family of UCITS (Organisms for Collective Investments in Transferable Securities).
The particularity of the FCPR is that the majority of the shares held are not listed on the stock exchange. What does it mean ? Well, an unlisted stock can’t be bought or sold on the stock market. It will therefore generally be issued by small and medium-sized companies seeking financing, which approach investors directly, without going through the stock market.
FCPR is said to be a “private equity” fund, which in France will be more commonly called “investment capital”. It is an investment method where the investor dedicates capital to the development or buyout of a company with growth, transmission or recovery needs. The capital can therefore be injected into young companies in full expansion and with extremely promising ambitions, as well as in companies on the downward slope, whose activity is running out of steam or which, for lack of financing, cannot materialize projects which would make it possible to renew and bounce back better.
The different FCPRs
There are three types of FCPR
- The classic FCPR, where more than half of the capital is invested in unlisted securities;
- The FCPI (Fonds commun de placement dans l’innovation), where the capital is invested for at least 70% in unlisted securities of companies presenting an innovative activity. The sectors concerned will be new technologies, IT, medical or pharmaceutical research, aeronautics or even space research, etc. Only the remaining 30% can be invested in other funds without constraint, such as listed shares, bonds, etc. ;
- The FIP (Local Investment Fund), where at least 70% of the capital is invested in unlisted regional SMEs. The rest of the funds will be freely invested. It should be noted, however, that the Corsica and Ultramarin FIPs will have to concentrate investments in local SMEs.
How does an FCPR work?
As we said, the FCPR is a co-ownership investment fund, formed on the initiative of an asset management company. Investment in an FCPR is accessible to individuals for a predefined period, generally ranging from 8 to 10 years. Over this subscription period, the capital is blocked. This is logical since its main purpose is to finance companies in need. The only option that would be open to an investor who would like to recover his capital before the set deadline would be to resell his shares, but he will still have to find a buyer. Specific cases of force majeure will also allow you to recover your capital: death, disability, or dismissal.
Before getting there, you should know that the creation of an FCPR is largely regulated. Here are the chronological steps:
- An authorization to set up an FCPR must be issued by the Autorité des marchés financiers (AMF);
- A regulation setting the conditions for the management of transferable securities is then drawn up;
- The rights of each saver with respect to the securities are also established;
- A minimum amount of assets of €380,000 must be gathered. They will be assessed by an auditor;
- Finally, a portfolio management company (investment firm or bank) can set up the FCPR.
Like the majority of investment funds, whether in euros or in units of account, fees apply, and the FCPR does not cut it either. Subscription fees equivalent to a maximum of 1% of the amount invested are deducted when the fund is marketed. Then, fund set-up costs are around 0.1% of the amount invested, management fees ranging from 1 to 3% are also deducted annually, and exit fees may apply if there is redemption. of capital before the end date of the commitment. All of these fees and the breakdown of the percentage are clearly set out in the KIID (Key Investor Information Document), which is a mandatory pre-contractual regulatory document submitted by the fund manager.
What are the advantages of an FCPR for an investor?
Investing in FCPR is part of a more global investment strategy. Since the funds are blocked on company shares wishing to develop or recover, the risk of capital loss is significant. It is common for funds to invest in startups that are not yet making a profit. Even with one of the most promising projects, the risk of capital loss remains really high, even if it should not be forgotten that to be marketed, the funds must have received approval from the AMF (Autorité des Marchés Financiers) and are submitted to the expertise of fund managers.
However, the performance potential is also very high, compared to a share in a company that is not renewed. The objective of an investment in units of account remains to hope for a return through interesting, avant-garde, promising and innovative investments. The risk/return balance is therefore rather balanced, and many advantages confirm the interest of investing in FCPR.
A profitable and diversified investment
The FCPR allows multiple investments, within companies of various sectors of activity. The profitability of startups is in fact only rarely proven before the investment, since it makes it possible to envisage exporting a successful product, developing a range of flavors, scents, colors or other. Investing in innovation remains a measured risk since, by definition, we tend towards these developments. Some sectors are probably more promising than others, more promising because they are subject to more demands. The same is true for supporting local activity. It is a daring bet but one that must be fully assumed, without excessive risk of capital loss.
A socially responsible investment
Did you know about SRI? It brings together the approaches that consist of integrating extra-financial criteria into its investments, such as respect for the environment, social, societal, ethical, health and other issues. By investing in FCPR, in particular in innovation or local funds, the investor supports a green and local economy, and can therefore clear himself of any label of “irresponsible shareholder, attracted solely by profit to the detriment of the quality of the service or the resources of the company being financed”. Today, the consumer is looking for organic, the good, the short circuit, the local, the taste, the authentic, the natural, the progress respectful of the environment, the eco-responsible and citizen approaches, and many other fights. Daily. The investor is therefore part of a form of social or societal responsibility, as companies have an obligation to do.
The possibility of investing in FCPR via life insurance
The money invested in an FCPR is blocked for the period predefined at the time of subscription. The lack of liquidity is therefore one of the major drawbacks of this type of investment. However, by investing in it through a life insurance contract, this problem finds its solution. Indeed, on a life insurance contract, whatever the type of contract and the investments made, the capital invested is available over the entire duration of the savings, and it is then the insurer who ensures the liquidity of savings. Thus, no more problem of immobilized money, while enjoying the advantages of FCPR.
The taxation applied can be interesting on an FCPR, but it will depend on the method of subscription at the time of entry. By investing directly and without an intermediary in an FCPR, the capital gains realized will be exempt from capital outflow tax, provided that the FCPR has been kept for at least 5 years. However, social contributions will remain due.
On the other hand, by investing through life insurance, these same tax advantages will only apply after at least 8 years of seniority. Before, the capital gains will then be included in the annual income to be declared in the calculation of income tax. The PEA (Plan d’Epargne en Actions), which makes it possible to acquire and manage a portfolio of company shares, allows investment in FCPR under the same conditions as a direct subscription.
It should also be noted that an investment in FCPIs or in FIPs, in other words in small innovative and/or local companies, makes it possible to benefit from a tax reduction of 18% of the amount invested, and which can go up to 25 % depending on the investment made of the remaining 30%, also in innovation or proximity, or not. However, the tax-exempt amount may not exceed €12,000 for a single person, for a maximum tax reduction of €3,000, and €24,000 for a married or PACS couple, for a maximum tax reduction of €6,000. . This tax exemption is included in the cap on tax loopholes of €10,000 per year and per taxpayer.