FCPR Amundi Fleurons des Territoires

Fund commentary

Investment rationale

FCPR Amundi Fleurons des Territoires is a private equity risk fund intended to give exposure mainly to unlisted euro area companies through equity, quasi-equity and debt instruments. The August 2022 rules describe a fund designed for investors able to accept a long lock-up, with capital blocked for at least 8 years and up to 10 years if the life of the fund is extended. Its role in a portfolio is that of a specialist satellite allocation rather than a liquid core holding, given its focus on non-listed PME and ETI investments, limited liquidity, and explicit risk of partial or total capital loss. It is a distinct choice because it combines French recovery-label constraints, a focus on development and transmission transactions, and Article 8 ESG characteristics with annual ESG monitoring. Those rules set 31 December 2022 as the latest subscription closing date.

Investment strategy

Under the August 2022 fund rules, the stated objective is to build a portfolio of participations located in the euro area, composed mainly of equity securities, securities giving access to capital, debt instruments, and, on an ancillary basis, shareholder loans to companies in which the fund holds at least 5% of the capital and within 15% of fund assets, or bonds. Investments are intended mainly in Fonds Propres and Quasi-Fonds Propres, with a policy focused primarily on PME and ETI in the industry, services and distribution sectors, mainly through growth capital and transmission deals; the fund may also invest on an ancillary basis in larger companies provided they meet at least two of the three ETI criteria. Because the fund has the Label Relance, it must invest at least 60% of invested amounts in equity or quasi-equity instruments issued by companies headquartered in France, and at least 20% of invested amounts in such instruments in French companies as defined by the rules; investments in a single company are targeted not to exceed 10% of total subscriptions, and the fund targets at least 10 holdings. Pending investment or pending distributions, assets may be held in euro-denominated equity UCITS, treasury, money market or bond UCITS, bank cash, and derivative instruments for currency hedging including swaps; borrowing is permitted up to 10% of assets, and the fund does not invest in hedge funds. There is no benchmark or reference index named; the investment period runs for 4 years from inception and may be extended once by 1 year, while fund life is 8 years and may be extended by two additional 1-year periods. Parts A and A’ are capitalising during a 5-year distribution lock-up, and distributions follow a waterfall including return of paid-in capital, a 5% annual priority return for A and A’ parts, a catch-up for B parts, then 80/20 sharing between A/A’ and B parts. The priority return determines the distribution order; it is not a guaranteed yield.

Investment philosophy

• Under the August 2022 investment policy, the investment universe is mainly euro area companies, with a practical concentration on French-headquartered businesses because the Label Relance requires at least 60% of invested amounts in equity or quasi-equity instruments of French issuers and at least 20% in qualifying French companies.

• The fund seeks mainly minority stakes and focuses primarily on PME and ETI, especially in the industry, services and distribution sectors, with most investments expected in capital development or capital transmission transactions.

• Portfolio construction is framed by explicit limits: no more than the total subscription amount can be invested in companies, a single company investment is targeted not to exceed 10% of total subscriptions including follow-ons, the fund aims to hold at least 10 participations, and shareholder loans are limited to 15% of assets where the fund owns at least 5% of the company’s capital.

• ESG integration combines financial analysis with extra-financial analysis, including Amundi responsible investment exclusions, exclusion of companies rated “G” in Amundi’s ESG framework, and a bespoke ESG audit with a minimum required score for non-rated participations; ESG reviews are repeated annually.

• Risk management also relies on legal and diversification ratios, including at least 50% in eligible FCPR assets, a 10% limit in securities of one issuer, 35% in one UCITS/AIF, a 40% capital or voting-rights holding cap in one issuer, and derivatives used only for hedging, notably currency risk.

The asset manager

The August 2022 fund rules identify the management company as Amundi Private Equity Funds (Amundi PEF), a société anonyme with a board of directors and share capital of EUR 12,394,096. Its registered office is at 91-93 boulevard Pasteur, 75015 Paris, it is registered with the Paris trade register under number B 422 333 575, and it is authorised as a portfolio management company by the AMF under number GP99-015. The fund depositary is CACEIS Bank and accounting administration is delegated to CACEIS Fund Administration.

Strengths

The August 2022 investment policy differentiates the fund through its combination of private equity exposure, French recovery-label commitments and ESG promotion under Article 8 of the SFDR framework. Its strategy is specific in requiring substantial French equity or quasi-equity investment while still operating within a euro area private markets mandate and focusing on PME and ETI in industry, services and distribution. The structure is also distinctive: an 8-year life extendable to 10 years, a 4-year investment period extendable by 1 year, targeted diversification across at least 10 holdings, and a detailed waterfall with a 5% priority return for A and A’ holders before full carried-interest sharing, subject to available proceeds rather than a guaranteed return. The fund may also co-invest alongside other Amundi-managed vehicles with similar policies, which the rules frame through allocation and conflict-of-interest procedures.

Risks

The fund states a risk of capital loss because it offers no guarantee and invests mainly in PME and ETI, so investors may not recover part or all of subscribed capital. Liquidity risk is significant because holdings are mainly unlisted or listed on less liquid markets, which may prevent timely exits or force sales below expected values; this is reinforced by the investor lock-up of at least 8 years and up to 10 years. It also names equity risk, credit risk, convertible bond risk, counterparty risk, interest-rate risk, currency risk and sustainability risk, reflecting its ability to invest in equity-linked instruments, bonds, money market assets, foreign-currency exposures and hedging derivatives. The documents also highlight the high level of direct and indirect fees as a specific risk factor that may reduce investment profitability and contribute to capital loss, and note that preference shares or shareholder agreement clauses can cap upside while leaving downside exposure intact.