A new French pension funds regime could be a good news for private equity

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private equity

A new government is typically keen to make as many friends as possible, and in France, the leadership headed by President Emmanuel Macron looks to have built bridges with a new pension funds regime. Macron has put a big tick in the box of the French private equity sector with the initiative, which has been created for the purposes of financing private and listed businesses.

The second Macron Act is part of a large reforms package which is due to be introduced and signals the beginning of a pension funds framework which some feel is long overdue in France.

So what could this shake up entail? The most significant change could be the use of capital accrued in France’s pension pot, which traditionally has lain entirely with the state, in financing the French economy, through investment in funds – with an obvious boost for business as the result.

The Association Française des Investisseurs pour la Croissance (AFIC) has been among the committed advocates of pension reform, and has highlighted its fundraising figures in order to demonstrate how a local pension funds framework could benefit private equity in France.

Now the calls for reform seem to have born fruit, with an expectation that the government will turn its attention to pension reform in the new year.

But it remains to be seen just how much the government are prepared to shape a system in a more ‘Anglo-Saxon’ fashion. The current French system, whereby workers pay into a government pension pot, rather than contribute directly towards their own pension, is passionately guarded by some as a matter of national pride.

Pensions are just one of a number of issues the new government will be expected to sink their teeth into, with issues such as a rigid civil service, inefficient social security spending, and blurred lines between local and regional authorities also on the agenda.

There is a view that the time is nigh to change the balance of pension fund investment into the private equity sector; one that is shared by the noted Monaco banker, Gérard Cohen.

Monaco’s Gérard Cohen said: “At present, the share of foreign pension funds into private equity far outweighs investment from domestic pension funds. The government is now seeking to redress the balance, and this should be seen as not only a huge boost for the private equity sector but, in the long run, for the French economy as a whole.”

Photo: © Choat / Adobe Stock

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