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HIGH-PROFIT INVESTMENT

A LUXEMBOURG ALTERNATIVE INVESTMENT VEHICLE

What is a High-Profit Investment ?

A secure high-yield investment refers to an investment in financial products that are not necessarily secure, but whose management allows for the constant reduction of risk. The goal for the investor is to recover the amount of their initial investment with a real objective of capital remuneration.

Secure high-yield investments generally fall into the low-risk or controlled-risk investment group.

I will deliberately take real estate as an example, which is the favorite investment of the French and seems the most secure. For example, since the beginning of 2022, Parisian real estate is the opposite of a secure high-yield investment in the current context: prices have fallen so much that if you sell today, you could not recover your initial capital if you have bought recently, this remark being aggravated by the inflation factor which reduces the value of the capital but is not directly visible or felt. To summarize basically, prices have fallen by 2.1% over the first nine months of 2022 in Paris, and French inflation (one of the lowest in Europe) is 5.8%.

The value of the real estate drop and therefore the corresponding capital for 2022 will thus be 7.9%. What is secure in real estate is that there is always something left after a difficult period and that the value rebalances between properties: you will sell cheaper but you will buy cheaper.

Now let’s return to Phocus1, which operates exclusively on currencies by buying and selling parities of first-tier currencies (US, Canadian, and Australian dollars, yen, pound sterling, and Swiss franc). Its performance engine, based on three risk management systems, allows optimizing the management of high-yield currency investments while remaining always liquid.

Currencies least subject to inflation appreciate regularly and allow for a defensive position. Secure high-yield investments are part of the high-yield investment and high-yield financial investment groups.

Phocus 1 achieves remarkable performances on currencies and generates a monthly profitability varying between 0.5 and 2% on average, knowing that there are records when geopolitical situations are extreme and markets are very tense as recently, at the height of their volatility. Example of the pound sterling which fell by 15% in 15 days in September 2022. You can see in the following chart, the evolution from August 2021 to June 2022 of the performance of Phocus1 and its dynamic risk management, the gains being used to create performance

Feel free to sign up here to track our progress, view our brochure, and consider joining us

Why invest in an alternative investment fund in Luxembourg ?

Luxembourg offers a legal and fiscal framework advantageous to international finance. This small state, which has experienced steady and sustained growth for over a decade, is the richest in Europe and serves as an official haven for many fortunes, respecting the transparency criteria linked to European legislation to which the Grand-Duché belongs.

Do you have liquidity to invest ? Are you thinking about protecting money abroad ? Why not in our Luxembourgish alternative investment fund Phocus 1 ?

Discover why it is preferable to invest in Luxembourg rather than in France or any other European country !

1 .Luxembourg is a country that does not fear economic crises, its debt represents only 25% of its GDP (compared to 120% for France, for example, and 155% for Italy !)

2. Luxembourg is the leading financial center in Europe and the 5th in the world.

3. The Luxembourgish financial industry is globally renowned and offers guarantees for certain types of extremely secure high-yield investments, thanks to the concept of segregated accounts like with Luxembourgish life insurance. Investing in Luxembourg allows for diversification of investments due to the various existing asset classes.

4. The law provides more protection for savers.

What are the best investment opportunities for good returns in 2023 ?

Where should you invest in 2022 to ensure a good return ? Where to put your money in 2022? What are the best investments ? What are the most profitable investments? To answer these questions, it’s an opportunity to revisit some investments that are considered secure options :

• Investing Money in Life Insurance/strong>

Life insurance remains the preferred investment of the French population as it is low-risk. For those with little appetite for risk, boosting the return on life insurance is a good option. There are three choices of life insurance :

1) Euro funds, with guaranteed capital and a rate of return lower than inflation after tax ;

2) Units of account placed on the stock market, the value of which is not guaranteed by the insurer ;

3) Multi-support life insurance.

 

• What is Multi-Support Life Insurance ?

‍The purpose of this type of life insurance is to invest part of the capital in euro funds with guaranteed returns and the other part in the financial market, in units of account funds. These investments can be very profitable, but the opposite can also occur, which is why banks have established a floor guarantee with a minimum profitability threshold, a securing of capital gains, and progressive capital protection.  

Therefore, it is crucial to distribute one’s money between unit of account contracts and euro fund contracts with guaranteed returns. Moreover, an investment of at least 200,000€ in life insurance is made for estate planning purposes. As a result, the investment is interesting since the amounts paid (up to 152,500€) do not enter into the estate assets and are exempt from inheritance tax.

And placing 500,000€ in life insurance? 500,000€ will improve the interests and will be recovered again by the investor, or by the beneficiary if the investor dies. Once the life insurance is withdrawn in the form of capital or annuity, the 500,000€ will still be subject to income tax.

 

• Paper Stone or SCPI (Real Estate Investment Trusts)

Creating an SCPI (Société Civile de Placement Immobilier) with 200,000€? An SCPI is a long-term collective investment structure in real estate. SCPIs can be a real asset for investors. They have the choice between three types of SCPIs: investment, tax, and buy-sell SCPIs.

The first type offers a return of 3 to 5%: indeed, if you invest 500,000 euros in an SCPI, you will receive rent based on the number of shares you hold. The tax SCPI invests the funds collected in residential buildings. The buy-sell SCPI generates significant profits that are redistributed among shareholders through the renovation of degraded buildings.

Therefore, creating an SCPI, or at least being fully involved in it, allows for generating a good return as soon as one starts investing a significant amount.

Rental Real Estate

‍Rental real estate remains one of the least risky markets. You may be tempted to invest in new or old properties. So how to choose? Investing in new properties allows you to benefit from significant tax advantages and notary fee reductions. The Pinel law allows for a tax reduction of between 6 and 21%.

This is conditioned on the rental duration (from 6 to 12 years). Investing in old properties also has advantages. Indeed, old real estate is generally more accessible, as it is cheaper by 20 to 25%. Thus, if the real estate property is well located, it can generate an interesting rent for the investor with a net yield ranging between 2.5% and 7%. However, it is essential to take into account the renovation costs.

You can visit the Castel Capital website, which offers an article on changes in rental real estate in 2022 by clicking here.

 

Private Equity

How to ensure that your investment is indisputable?

1/ Investing in Private Equity requires choosing a well-known and proven asset management firm.

2/ It is necessary to target the size of the companies in which you wish to invest. Indeed, there are funds for innovation capital, development capital, and transmission capital. In our case, it is interesting to focus on transmission capital funds, which concern companies whose shareholding is going to change.

3/ One must think about their investment strategy and choose one that allows diversifying the portfolio.

« It is necessary to mix themes as much as possible. »
Romain Chauvin, Private Equity product specialist at Edmond de Rothschild.

4/ You can also mix vintage funds. These correspond to funds that launch a new range each year. Launching a new range each year helps to limit cyclical risks. As a reminder, in Private Equity, the profitability of investments is evaluated in vintage year. This means that the year of the first investment is considered as a reference to follow the evolution of returns and thus the evolution of profitability.

Which is the most profitable investment between liquid savings and bonds ?

Liquid savings is a type of savings that allows immediate access to your money. It can take the form of a current account, a Livret A, a youth savings account, etc. A bond is a part of debt issued by a state, a company, or a local authority. But which is more profitable ?

The savings account is not necessarily the most profitable investment in the medium and long term. Indeed, bank investments with guaranteed capital have a rate of return lower than the real rate of inflation. Your savings lose purchasing power. Savings accounts keep liquidity in the short term but do not necessarily enrich your wealth.

The main risk for the creditor with bonds is not being repaid the loaned amount in case of the debtor’s bankruptcy. Thus, the more rewarding the interest rate, the riskier the investment. If you want to maximize the chances of being repaid the entire loan you have granted, prefer lower coupons.

Therefore, if you have a taste for risk, prefer bonds that can bring you significant returns. Otherwise, liquid savings is the ultimate safety.

How to achieve a return of >10% in 2023?

A 10% return investment means achieving a 10% return. A return corresponds to the ratio between a stock’s dividend and its price. Dividends are only a part of the profitability obtained from holding a stock; capital gains are the other important component of returns.

Dividend Yield = Annual Dividend / Stock Price

On average, high-yield stocks correspond to companies that pay a dividend to their shareholders of 4% or more. How to achieve a 10% return in 2022 with investments ?

You can implement investment strategies to diversify your assets and thereby gain in return. It is possible to invest in real estate or stocks. We invite you to consult the page ‘best investment 150,000 euros’ which advises you on where to place your money to diversify your assets and optimize your returns. Click here.

What investment yields the most in 2023?

Certain investment types can offer substantial gains. Yet, it’s crucial to note that the level of risk correlates with the anticipated returns, and the principal investment is never assured. Here’s an insight into what could be the world’s most lucrative investment.

Among the interesting investments, we can find structured products. These are monetary funds of the OPCVM type that can achieve annual returns of up to 9%. Structured funds are advantageous for seeking high-performance investments as there is some control over uncertainties and volatility.

Next, real estate merchant funds (from 150,000€ in liquidity) become interesting for generating profits. Indeed, the principle is to participate in operations of buyback, refurbishment, and resale within a type of FPCI (Professional Capital Investment Fund) company, hoping to achieve 9 to 10% annual return after a few years.

You can also invest in real estate abroad, in life insurance, or in Private Equity to make money. In terms of investment, options represent the ‘ultimate class of investment for an individual.’ The principle is to speculate on the rise (call) or fall (put) of an index or a stock of choice. The multiplier coefficients are very advantageous. It is also possible to incur significant losses since it is a highly speculative sector.

Cryptocurrencies offer particularly high potential returns in the short or very short term. They are very diverse, with about 6,000 in existence. Transactions are instantaneous but never guaranteed, their values are extremely volatile, and some renowned financiers such as Bill Gates or Warren Buffett describe them as ‘casino money.’ In 2022, they have proven to be a very poor investment, recording value losses of 50% for the most well-known and up to 100% for some that have literally exploded in flight.

Investing in Socially Responsible Investments (SRI) allows for combining sustainable development and financial performance. You can invest in funds and SICAVs that guarantee consideration of ESG criteria. SRI funds are generally offered by banks, insurers, mutuals, and financial investment advisors. They are positioned in securities accounts, PEA (Plan d’Epargne en Actions), or as units of account in life insurance.

Before investing in an SRI fund, you must understand that the SRI investment strategy can vary depending on the fund. The SRI investment policy of the fund may also concern the entire portfolio or only a part of the assets. To select the companies in which you want to invest, you can exclude those that do not meet basic socio-environmental criteria and invest in those with environmental thematic approaches.

You can also invest in emerging countries. According to a 2019 report by the International Monetary Fund (IMF), emerging countries had a growth of 4% compared to 2% for developed countries. But how to know which emerging countries to invest in the stock market? The charts representing the MSCI Emerging Markets Index give us a good idea for investing well in these emerging countries :

Thus, through these stock indices, you can practice capitalization, which consists of integrating the generated interests into the initial capital. 

Investing in an ETF remains one of the best monetary return investments in emerging countries. Indeed, ETFs aim to replicate the evolution of the performance of a given index and produce a return. ETFs allow for diversification of investments at a lower cost. However, emerging currencies fluctuate and make the monetary policies of emerging countries sometimes unstable. Thus, currencies could devalue against major currencies like the euro or the dollar. Therefore, a rise in emerging indices could be erased by a fall in currencies. So investing in an ETF could be a good monetary investment.

You can consult our pages ‘best investment for 150,000 euros’ by clicking here and ‘best investment Luxembourg’ (Link to come) for more information.”

“Entrepreneurship has always been my passion, and throughout my life, I’ve dedicated myself to conceiving ideas and services that people could embrace to enhance their lives.”

Jean-François Chauffeté
ENTREPRENEUR – FOUNDER OF PHOCUS1