Euro-denominated funds: The 2028 return will be determined this year

The life insurance sector has just posted its best first half-year ever, with €108.8 billion in premiums and net inflows of €36.5 billion. These cash flows will have no impact on this year’s rate of return. However, they will affect the rate in 2028. Here’s a brief look at how a product works that millions of French people hold without always understanding how it functions.
 

A rate that reflects the past
A euro-denominated fund is a pooled bond portfolio structured in successive layers over a period of fifteen or twenty years. The rate paid out each year is not the market rate: it is the average yield of this bond portfolio.
 

The 2.63% yield for 2025, net of management fees according to the ACPR, therefore does not reflect the financial conditions for 2025. It reflects the combined return on bonds purchased since the mid-2000s, a significant portion of which were acquired during the decade of zero interest rates, between 2012 and 2021.
 

This discrepancy has long worked in the investor’s favor. When the market was no longer yielding anything, euro-denominated funds continued to pay rates inherited from older, higher-yielding bonds. Since 2022, the trend has reversed: market rates have risen rapidly, while the rate paid has remained roughly stable for three consecutive years. Same inertia, opposite effect.
 

Two taps filling the same basin
The stock is replenished through two channels. Matured bonds are reinvested at current market rates, and the 10-year OAT has risen back above 4%, a level not seen since 2009. New inflows, meanwhile, are invested entirely at current rates and automatically dilute the older portion of the portfolio.
 

This is where the half-year figures take on significance in terms of asset growth. The 36.5 billion in net inflows, along with the return of euro-denominated funds to positive inflows after several years of outflows, are accelerating this renewal. The payments in 2026 will contribute to the returns in 2028.
 

The reserve that masks the trend
A nuance—and a significant one at that. Insurers have a reserve—the profit-sharing provision—which they draw upon to smooth out rates from one fiscal year to the next. According to the ACPR, it fell from 4.3% to 4% of outstanding premiums in one year. The trend is far from uniform: bancassurance companies drew from it, while traditional insurers continued to add to it.
 

The ACPR attributes the stability of the 2025 rate to two interrelated factors: this drawdown on reserves, and the increase in the return on insurers’ assets, which rose from 2.5% in 2024 to 2.8% in 2025. Part of what was paid out was therefore drawn from reserves rather than generated. This can be interpreted in two ways, both of which are true. The portfolio’s actual performance was lower than the stated rate. And the insurer maintained a rate that it was not yet able to fund, until the renewal took effect.
 

Bonuses and Their Cost
The same mechanism explains the preferential rates that insurance networks are currently offering on new premiums. New money is what accelerates portfolio renewal, and the insurer agrees to cover the cost. These bonuses always come with conditions: a minimum number of unit-linked shares, a minimum commitment period, and a maximum contribution limit. That’s what you need to look at—not the introductory rate.
 

Not all euro-denominated funds are being renewed at the same rate
But we need to specify which fund we’re talking about. A traditional euro-denominated fund from a major banking network, with tens of billions in accumulated assets over the past twenty years, is being renewed slowly: new inflows account for only a small portion of the total assets. A newer fund, launched after 2022 by an online insurer or as part of a “new-generation” policy, consists almost entirely of bonds purchased under current terms. This explains why the interest rates paid can vary from single to double from one policy to another.
 

So-called “dynamic” or “real estate-focused” funds operate on yet another principle, since they include non-bond assets. Their capital guarantee is sometimes partial or subject to term conditions. Confusion is common at the time of purchase and is often not realized until redemption.
One final factor weighs more heavily than all others over the long term: management fees on assets under management. Between a policy with a 0.50% fee and one with a 1% fee, the annual difference seems negligible. When compared to a gross interest rate of 3%, it accounts for one-sixth of the return every year, without exception.
 

Key Takeaway
As long as market rates remain higher than the average return on the portfolio, that average rises on its own, without the need for any management decisions. Few assets held by individuals offer this level of clarity regarding the direction of their performance.
 

This changes the interpretation of a 2.63% rate. This figure does not indicate a product that is running out of steam; rather, it describes a portfolio that is in the process of being rebuilt. Relying solely on this figure amounts to exiting at the beginning of the cycle rather than at its end. Of course, this does not eliminate the need to compare management fees: these are charged annually, regardless of the portfolio’s status.
 

Julien Nebenzahl, president of eToro Patrimoine, puts it another way: the trend is already underway, and “it requires neither analysis, nor foresight, nor picking the right moment—just being there while it happens.” This reasoning comes from someone who sells life insurance. It is nonetheless accurate.