Livret A/Assurance Vie

[allanb]

I'm returning to this topic because I think that both Parsnips and Complikate have missed a rather important point about guaranteed-capital funds.  

First, the name.  IMHO, Complikate has introduced a red herring: the funds I am talking about are those described as having "capital garanti".  Whether a particular issuer calls them "fonds à capital garanti", "fonds en euros à capital garanti", or - for short - simply "fonds en euros", is surely irrelevant.  If you look at the full range of issuers - banks, online insurers, and actual insurance offices on the street - I think you'll find these terms used interchangeably.  I can produce examples if you want, but I suggest we stick to the topic, which was the actual nature of the guarantee in any of these funds.   

What I maintain is that in a typical contract guaranteeing the return of your capital, the guarantee doesn't apply unless you leave your money undisturbed for a specific period, i.e. until a specified maturity date.  To put it another way, if you think you might want to withdraw money early, you can't rely on the guarantee.

To show that this isn't a figment of my imagination, here's a definition from an information site called DEFISCONSEIL.  I don't know exactly what its status is, but I'll quote it for what it's worth.  The emphasis is mine; please note what it says about the name, as well as about the time factor.

FONDS EUROS

Le fonds en euros est un fonds à capital garanti. Il permet un investissement sans risque en capital et bénéficie du rendement lié au marché obligataire. Le capital étant garanti, les détenteurs ont l'assurance de retrouver leur mise initiale au bout d'une certaine période.

Now I obviously can't say that this is true of every such fund; there are hundreds of them, and life is too short to read all the prospectuses.  However, I've used the internet to try to find what the banks and insurers actually say in the small print.  Many of them, unfortunately, say nothing about this on their websites: they ask you to apply for written documentation, and I suspect this would invite sales calls which I don't want.  But out of about a dozen that I looked at, I found six that did make a statement about the conditions of the guarantee, and in every case it was stated that the guarantee applies only if the investment is left untouched until a stated maturity date.

Here are three examples from real life:

(1) from BNP Paribas, under the heading "Fonds à capital garanti" :

Les souscripteurs sont assurés, à une échéance établie dès la souscription, quelle que soit l'évolution des marchés, de récupérer au minimum la totalité de leur capital investi.

(2) from the online insurer, Fortuneo, referring to its Yucatan 3 fund:

"...le capital net investi 100% garanti à l’échéance du 9 mars 20015" - with a footnote: "Garanties sous réserve de n’effectuer aucun rachat avant l’échéance."

This may not be the same Fortuneo fund that Parsnips has, because he has stated that he can withdraw money at any time with no risk of loss.  He may be right; all I can do is suggest that he reads the contract very carefully.  Maybe he just has a similar fund with a different maturity.

(3) from the website of Crédit Agricole: "Le Crédit Lyonnais propose 4 nouveaux fonds à capital garanti..."

Two of the funds, named Talisman, have a 2-year duration and the other two, named Drakkar, have a 4-year duration, and the statement continues:

[these funds] "... garantissent au porteur, à l’échéance de 2 ans" [or "4 ans", whichever it is] "100% du capital initialement investi."

Then there is a further note, the most explicit that I've seen:

"Les garanties de capital et de performance des fonds ne s’exercent qu’à l’échéance de 4 ans (le 3 décembre 2008) pour les fonds DRAKKAR et de 2 ans (le 6 décembre 2006) pour les fonds TALISMAN. Néanmoins, en cas de besoin impératif, le porteur de chacun de ces fonds peut opérer des rachats à tout moment avant l’échéance, étant entendu que la valorisation du placement sera fonction des conditions de marché."

It could hardly be clearer.  If you take money out early, there's no guarantee.

 

Why spend so much time on this?  Because if somebody is interested in a guaranteed fund (as the original poster was) he ought to be informed about any conditions or limitations on the guarantee.  Some of the statements made in the thread about this have been wrong.  

I will add a comment: I'm not saying that these funds are a bad investment.  On the contrary: I have an assurance vie that contains nothing but a couple of SICAVs, and after what has happened to them in 2008 I would have been much happier if I'd chosen a guaranteed fund instead.

[parsnips]

Hi,

    You are still confusing different types of fund--the Yucatan 3 fund is definitely not a guaranteed euro fund in the french sense, it is a guaranteed fund in the UK sense, and everything you say about it may be true. The same is probably true of the other funds you quote, none of which ,purely by their conditions appear not to be typical french euro funds.  Most of the wrong statements in this thread have been made by you (in all innocence I'm sure). If you wish to pursue your researches further I suggest you risk getting some sales calls and communicate with the companies--maybe they will have someone who can enlighten you. I'm afraid I've had it.

[allanb]

I have been describing funds which offer a guaranteed return of capital, but only on condition that the money stays invested until a stated maturity date.  In your post on Feb 3 you denied that there are such things in France.  I have shown that there are, simply by quoting the insurers themselves.  You now apparently accept that they do exist (e.g. Yucatan 3 and others) and yet you say that I have been making erroneous statements.

Beats me. 

Assuming that you know what kind of fund you yourself have, i.e. one that guarantees your capital even if you withdraw money early, then it's clear that both kinds exist, and that the phrase fonds en euros can mean either of them.  In which case the best advice for an investor is not to rely on the name, but to read the small print.

[Blossom]

Can I hold both a Livret A and an Assurance Vie?

[suein56]

[quote user="Blossom"]Can I hold both a Livret A and an Assurance Vie?[/quote]

Yes.

Sue

[gas]

You can even hold a

Liveret a max 15.300€ plus accrued interest per person

Assurance vie

and

Liveret assurance Vie €15.300€ limit per person, some banks are offering a guaranteed 5% pa for 2009 with a capital guarantee for the full term.

[Un autre Gallois]

[quote user="parsnips"]Hi,

    Re GP's post, I am getting tired of being told that "no entry fee" life assurance plans recoup their loss of the entry fee by increased annual charges-this may once have been true, and perhaps still is for some plans- but the best online plans have yearly charges which are the same as ,and even lower than, a conventional 4.5% "up-front" plan,which of course also has a yearly management fee . See fortuneo/ symphonis Vie on the web--I have been with them for several years and"je ne suis pas dupe!"

[/quote]

Hi - Hope I haven't missed the answer to this question! I am interested in the Fortueo/Symphonis investment, but I am hesitant because I am not sure if there are any guarantees if they go bust! I believe French banks' investments are guaranteed up to about 72.000 euros.

I recall that on a previous forum (French News) "Rick C" was an investor over a considerable period in this company-I wonder if he is out there somewhere?

[allanb]

[quote user="Un autre Gallois"]I am interested in the Fortueo/Symphonis investment, but I am hesitant because I am not sure if there are any guarantees if they go bust! I believe French banks' investments are guaranteed up to about 72.000 euros.[/quote]The Banque de France (http://www.banque-france.fr/) maintains a list of the financial institutions that are covered by the state guarantee: Fortuneo is on the list.

It appears that the amount is currently €70,000.