Allocation of savings – Rexecode study published

At a time when the financing of the European economy and the competitiveness of capital markets are at the heart of discussions at European level, Institut Rexecode (Centre de recherche pour l’expansion de l’économie et le développement des entreprises), with the support of AMAFI, AFG and France Invest, has published a study on the optimal allocation of household savings in France and Europe.

Entitled “Rethinking the allocation of savings in France and Europe: how to make it more optimal from a macroeconomic perspective “, the study is organized around two modules:

• An international comparison of household savings allocation

• An optimal allocation analysis, from the dual perspective of the risk/return trade-off for savers and maximizing the economy’s growth potential.

It highlights a paradox: the French save a lot, but have relatively limited financial assets compared to other developed countries. This is due in particular to a structural under-exposure to equities, which account for just 19% of household financial assets. This situation weighs on the return on long-term savings in France, the lowest of the countries studied, and limits the financing capacity of companies, particularly in phases of growth and innovation.

Rexecode’s research shows that a greater allocation to listed and unlisted equities (from 19% to 27%) would have significantly improved the return on household savings over the long term, with little or no additional risk. Such a development would also help to strengthen the financing of productive investment, and ease bottlenecks in the financing of innovative companies, both listed and unlisted, particularly in the scale-up phase. As the Swedish example shows, national savings that are much more geared towards equity capital flow into companies, particularly domestic ones, encouraging IPOs and business development.

It therefore seems highly desirable to increase the amount of French long-term savings invested in listed and unlisted equities. This does not necessarily require structural change, but already a more optimal allocation, even if a layer of capitalization for retirement would have additional virtues in terms of public finances.