The health crisis linked to the coronavirus, as well as the lockdown put in place in the first quarter of 2020, has had many consequences on the economy. It has also had repercussions on the financial markets and has disrupted the savings behavior of the French. Life insurance, the preferred investment of the French 1 , seems to be resisting the shockwave rather well .
Can the crisis weaken the performance of the euro fund?
Covid-19 has led to a real stock market crash on the stock markets and significant tensions on the bond markets, which list debts issued by governments and companies. But thanks to the very accommodating monetary and budgetary policies deployed by central banks and public authorities, calm has returned to the markets.
Traditional euro funds are mainly invested in bonds, for 80% of their assets according to figures from the specialist firm Good Value for Money 2 . The main risk with this type of investment: the bankruptcy of the issuer who is then unable to repay the bond at maturity. But of these 80% of bonds, almost half (40% on average) are securities issued by States, whose bankruptcy seems unlikely . The rest comes from companies, more sensitive to the economic situation, but insurers have a very cautious approach in their selection of securities to avoid risky companies.
Investing in financial markets involves a risk of capital loss.
Finally, euro funds with a real estate focus should suffer little damage from the crisis, at least in the short term. While concerns have emerged regarding the impact of the coronavirus on rental real estate, the repercussions will not be felt immediately . In addition, insurers, here again, are targeting high-quality properties, which are less affected by market corrections. Some euro funds, known as dynamic funds, which include a higher share of equities, are likely to have a bad year because the equity engine will probably not be there. Fortunately, these funds had tended to reduce their exposure compared to 2017 and 2018: at the end of 2019, the share of equities only amounted to around 10%.
Will investments in units of account suffer?
In life insurance, there is the guaranteed euro fund (excluding management fees) and the account units which carry a risk of capital loss . The insurer does not guarantee their value, which varies depending on the underlying in which they are invested. Because behind this term are hidden very diverse investment vehicles.
The most affected will certainly be equity funds, which could show poor performances at the end of the year , despite the rebound of the stock market since the crash of February. Indeed, concerns about the future rarely benefit the markets.
Diversified and flexible funds, which constitute a large proportion of the units of account available in life insurance, should allow savers to cushion the fall since their exposure to shares is limited. Depending on the management process and the quality of the management implemented, the results should vary significantly from one product to another.
Units of account present a risk of capital loss.
As for real estate vehicles (SCPI), the impact on their performance seems very limited for the moment for most products with an anticipated average annual performance rate slightly below 4% 3 according to the figures known at the end of the first half of 2020.
How did savers react?
During the lockdown, the French were unable to consume, so they saved a lot. Since then, the savings rate has remained high due to the uncertainty surrounding the economic recovery and the rise in unemployment. As a result, the outstanding amounts of current accounts and regulated savings accounts (livret A and sustainable and solidarity development savings accounts) have exploded. In the first half of 2020, the Livret A collected nearly 20.41 billion euros. 4 .
On the contrary, life insurance has been shunned. On this envelope, the net collection of withdrawals has been negative since March, notes the French Insurance Federation (FFA). 5
Notable fact: despite the reduced appetite of savers for this envelope, the payments made since the beginning of the year include a high share of non-capital guaranteed units of account, of the order of 36% 5 .
The information provided in this article is for purely informative purposes and cannot be considered as advice provided by Fortuneo (legal, tax, investment or other) .