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French insurers looking to invest E6bn

French insurers are to invest over E6bn in private equity by 2007 according to Philippe Trainar, director at the Association of French Insurance Companies, in a speech at the CEFI Summit Europe 2005 in Paris.

He said contrary to the belief that insurance companies were naturally predisposed to avoiding private equity, insurance portfolios in fact share a number of similarities with private equity portfolios in that both require a long-term approach. Trainar also said insurers are looking at private equity because they need to increase returns and reduce risk by diversifying into other asset classes.

New regulations governing investment have also encouraged higher levels of capital committing to private equity, which has seen the average minimum investment limit in non-listed companies rise from 5% to 10%.

Illiquidity is still a concern, so Trainer urged insurers the best way into the asset class was through funds-of-funds. “Investing in a fund-of-funds route will reduce volatility. It is a good strategy to invest in different industries and companies with different maturity cycles,” he said.

He added that insurers should be aiming to commit 10-15% of their total investment capital to private equity.