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Financière de l’Echiquier, a Paris-based asset manager, has agreed to merge its business with real estate specialist Primonial Investment Managers in the latest sign of fund managers seeking to capitalise on Emmanuel Macron’s economic reforms.
Primonial will buy a 40 per cent stake in Financière de l’Echiquier, which will take over the management of assets from the real estate fund group. Its founders, Didier Le Menestrel and Christian Gueugnier, will also become shareholders as part of the deal, which will create an investment group with about €10bn of assets under management.
Asset managers in France see opportunities in the business-friendly policies announced in October by Mr Macron in his first budget. The measures were aimed at drawing in investment in France to revitalise the eurozone’s second-largest economy.
These include scrapping the wealth tax on assets excluding property, and introducing a 30 per cent flat tax rate on capital gains, dividends and interests — a long standing demand from investors and entrepreneurs.
“These reforms are game-changing for active asset managers,” said Mr Le Menestrel. “Before, the entrepreneurial environment was so bad. With Macron it’s actually the contrary.”
By restructuring the wealth tax so that it only applies to property assets, Mr Macron is hoping to free up capital that can be invested in the economy. However, this means that French real estate as an asset class may be at a comparative disadvantage to investing in equities or start-ups. Mr Le Menestrel said: “Primonial understood that it was time to not only push in real estate but to invest in equities also.”
Margins in asset management continue to be eroded by the shift into passive vehicles such as exchange traded funds that track investment benchmarks, which is pushing consolidation in the industry.
“The margins in active asset management are under pressure due to more regulation and competition from passive managers,” said Me Le Menestrel. “Scale and size is very important so we have to find ways to grow faster.”
This week, it emerged that pan-European private equity firm Idinvest was in discussions about a potential sale to private equity rival Eurazeo, and several asset managers including Amundi and Natixis.
Paris is Europe’s second-largest centre for the asset management industry after London, with around 650 companies. France is hoping to draw on this position to lure asset managers evaluating operations following the vote for Brexit. The French Asset Management Association has said that it is in talks with asset managers considering setting up outposts in Paris to retain access to the European Union once Britain leaves.
The French private equity industry is also supportive of Mr Macron’s business-friendly programme. “Lowering of corporate tax, cancellation of wealth tax, withholding tax of 30 per cent on capital gains and dividends, reforms of labour law for more flexibility — all of these are very good news for entrepreneurs, investors and for employment in France,” said Olivier Millet, chairman of AFIC, the French private equity and venture capital association.