“It takes a little time to put together a product like this,” conceded Nicolas Dufourcq, general manager of Bpifrance. During a press conference this Tuesday, October 14, the public bank announced the opening for subscription of its new product “Bpifrance Défense”, the outlines of which had been drawn seven months earlier, on March 20, during a day dedicated to the financing of French defense, at the Ministry of Economy and Finance. It was then a matter of imagining solutions allowing individuals to invest more easily in companies in our “Defense Industrial and Technological Base (BITD)”, namely in the 4,500 SMEs and startups whose at least 20% of their turnover depends on military purchases.
It is precisely this category of companies that will be in the sights of the new Bpifrance Défense fund. This is in fact a so-called private equity product., whose aim is to provide capital to companies not listed on the stock exchange, mainly VSEs, SMEs, ETIs, and to a lesser extent startups. In total, this new fund will ultimately consist of a portfolio of around 500 unlisted companies. Among them, at least 70% French companies, but also 30% European nuggets in this same sector. All this, with the lowest entry ticket in the history of Bpifrance: 500 euros, when that of its very first private equity fund (Bpifrance Entreprises 1) was, in 2020, still 5,000 euros. The maximum bet will be limited to 500,000 euros.
A recommended investment period of at least 10 years
If you can subscribe to this new product today – directly on the Bpifrance website – it will remain possible to enter this fund for 10 years, i.e. until October 2035. The total lifespan of Bpifrance Défense will be 20 years, with the possibility of being extended by one year twice. It will therefore be, as you will have understood, a long-term investment, with a recommended investment period of 10 years, knowing that your invested savings will in any case be blocked for a period of 5 years. It is impossible to withdraw your capital before this deadline, except in the event of the death of the subscriber, Bpifrance clarified this Tuesday, October 14.
To allow investors who wish to “exit” after this five-year period, 20% of the funds collected will be invested in liquid, low-risk assets: money market funds and thematic ETFs (trackers) exposed to the defense sector. This so-called “liquidity” pocket should make it possible to secure part of the funds invested by Bpifrance, in order to return to those leaving at least part of their initial investment. But nothing guarantees this: the money invested is subject to the possibility of partial or total loss, with a risk level rated 6 out of 7 on the SRI risk indicator scale.
The target return presented in return for this high level of risk, however, does not live up to what could be hoped for, in particular because of this pocket of liquidity, which is less remunerated. Bpifrance aims for a target rate of return of 5% per year, when its previous funds aimed for an unguaranteed target return of 8% to 10%, consistent with what is usually possible to expect from a “general public” private equity fund. “This projection is the result of modeling which took into account rather conservative scenarios”specified Adeline Lemaire, executive director and fund of funds of Bpifrance. Another explanation for this rather “disappointing” remuneration is that Bpifrance Défense is a “primary” fund, which will invest directly in the capital of companies and will acquire “new” shares, not “second-hand” ones – often less expensive securities -, as for a “secondary” fund such as Bpifrance Entreprise 3.
Finally, in addition to the possibility of subscribing without an intermediary from Bpifrance, the fund will also be accessible via various general public savings products: securities account, PEA, PEA-PME/ETI, life insurance, retirement savings plan (PER), and collective company retirement savings plan (PERECO), provided they are referenced by their distributors. For the moment, three players have already positioned themselves to offer this fund to their clients: the broker Meilleurtaux (via its life insurance contracts and its PER), AXA, and Natixis Interentreprises (via its group retirement products).
