Insurers in France are starting to acknowledge how hard it is to support certain popular retail savings products because the low yields from bonds that underpin them make it difficult to provide decent returns. One insurer recently announced it would cap the amount its customers can put into these products.
Fund managers in France have always had to compete with insurance and bank products. Many forces are against fund managers: the insurance and bank products may offer either guaranteed returns, enhanced rates or capital protection. French savers have shunned the risk of equities and perhaps also of some higher-yielding bonds – and why shouldn’t they when cash seems to do the job of providing for school fees and other outcomes?
Looking at the pressure insurers are under, though, fund managers see an opportunity to offer something meaningful into the retail market. Thematic or multi-asset funds might be two ways to go. But firms will have to make French savers comfortable with risk first, perhaps by persuading them that holding cash in money-market funds or savings accounts is riskier in the longer run than holding it in equities.
Nick Fitzpatrick, group editor of Funds Europe
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