France is a fusion of multinational corporations, a well-balanced plethora of leading industries, and a prime pillar in the economic health of the EU - France is an obvious magnet for various forms of international investment. The World Bank’s Doing Business 2020 report ranked France 32nd out of 190 countries. Its global trade highways and strong asset base are attributed to the country’s position as the 3rd largest European power.
Foreign investment has always been a long-standing helping hand in France’s successful economic infrastructure. In 2020, the country was the 18th largest recipient of FDI (Foreign Direct Investment) globally, with the UK, Switzerland, Luxembourg and the Netherlands standing as the main contributors. Over time, Paris has slowly risen as a frenzy of international business, currently home to the most multinational headquarters across Europe.
Intrigued about Investing in France? Learn here about the best methods of investing; ETFs, real estate crowdfunding and P2P Lending.
Why Invest in France?
As an international investor, France is one of the easiest countries to establish a financial imprint. The cogs of the French system work favourably towards foreigners. Even President Macron has made a key point about ushering in multinational investment; last year, 1,607 foreign investment projects went underway, creating roughly 450,000 domestic jobs. Sole investors and businesses alike are attracted to the French palette of well-performing sectors. As well as a key exporter of machinery, chemicals, automobiles and electronics, France is also a key player in the energy market - specifically nuclear energy. A recent focal point of modern sustainability and the rotation towards clean energy.
It goes without mentioning that France is the lead producer of electricity in the market regarding nuclear energy. Up to 79% of the energy flow in the region comes from nuclear power. Therefore, when putting clean energy into perspective France is already heading in the right direction, providing a hotspot for energy investment for foreigners - a sector that is likely to be a key focus in the forthcoming years. Without being a large institutional investor looking to cash in on large-scale french resources, the most common way to invest in the French economy would be through the stock market or exchange-traded funds (ETFs).
Investing in France with ETFs
Investing in Exchange Traded Funds (ETFs) is one of the most common hands-free ways of gaining profitable exposure to the French economy. They work by tracking popular indexes that list a collective group of high-performing companies, allowing investors a diversified approach to an international honeypot of potential growth. French stocks are predominantly sold on the Euronext Paris, which lists more than 800 companies and benefits from the backing of more than 6,200 institutional investors.
When it comes to French ETFs, there are a few options. Each honing in on various sections of the French economy. The creme-de-la-creme of high performers can be found in the CAC 40 index, which tracks the 40 most significant stocks registered among the 100 largest market caps in Euronext Paris. For a wider parapet, the MSCI France Index Fund tracks large and mid-cap companies. An interesting and alluring feature of the MSCI France is its equally balanced consistency. No sector weighs more than 20% of the entire holdings. So unlike an index like the UK’s FTSE 100 or the Swiss SMI, a hit to the financial sector would be slightly more absorbed.
The most common ETF used in France is the iShares MSCI France ETF, but here are numerous other popular options chosen by investors:
- Lyxor CAC 40 (DR) UCITS ETF (CACX)
- SPDR DJ Euro STOXX 50 ETF (FEZ)
- Franklin FTSE France ETF (FLFR)
- iShares MSCI Eurozone ETF (EZU)
All of the above funds will vary in the company’s tracked, as well as fees involved and differing management outlook.
Investing in French Real Estate
More niche investment avenues are starting to grow more crowded as investors seek the next ‘against the grain’ trend, or are simply seeking out higher capital returns. Investing in real estate has always been a popular way of protecting capital as house prices increase with growing demand; however, it isn’t always achievable for the typical earner.
Real estate crowdfunding is the practice of utilising an investment pool sourced from individual investors via an online platform; connecting the capital with up-and-coming housing property projects that require funding. The process cuts out the need for a banking intermediary and allows investment on a more frugal budget.
Real estate crowdfunding is on a powerful uptrend in France. EUR958M was collected through real estate crowdfunding in 2021, an increase of 90% from 2020. As the process grows in the collective investor psyche, more and more professionals are turning to real estate crowdfunding to diversify their more traditional portfolios.
France currently has 14 active platforms offering real estate crowdfunding. Sites like Homunity, Upstone, and Buildr are 3 of the most popular - offering affordable investment opportunities for small and large-scale real estate developments.
Peer-to-Peer Lending in France
Another straightforward alternative option for investing in France is Peer-To-Peer (P2P) Lending. In fact, France has been the largest market for alternative finance in Continental Europe since 2013, accounting for almost 20% of the alternative finance European market share.
With the alternative investment market a few steps ahead of most international economies, France stands as a more than suitable target for investment. There is currently a total of 36 P2P lending platforms registered in France, offering a variety of debt notes, such as October for business loans, or Lendosphere for green-related projects.
The Bottom Line
France is a top-tier hive of potential capital growth. Well-performing blue-chip companies have bred sector-balanced, resilient stock indexes’ like the MSCI France or the CAC 40. For a more direct approach, investing in real estate crowdfunding projects propagates economic growth whilst offering a strong return on investment and a broad range of choices. The P2P lending market is abundant, sitting ahead of Germany but just behind the UK in terms of total lending volume.
- The World Bank: “Doing Business 2020 Report”
- Santander Trade Markets: “Foreign Investment in France”
- The Paris Chamber of Commerce (CCIP): “Europe's Leading Business Region”
- Euractiv: “Macron urges foreign companies to invest in France”
- Business France: “2021, a record year for France’s attractiveness”
- Batinfo: “Real estate crowdfunding continues its strong growth with 2021 collection approaching one billion euros”
- P2PMarketData: “Peer-to-Peer Lending in France”