Euro-denominated funds: the comeback of a long-neglected investment

After several years of disappointing returns, euro-denominated funds are regaining their appeal. In 2025, their average return reached 2.65%, surpassing that of the Livret A and offering savers a real gain in purchasing power. This turnaround is reshaping the hierarchy of safe investments.
 

Just two years ago, euro-denominated funds were considered a neglected investment. Stuck below the 2% mark, they struggled to compete with the Livret A savings account, which was boosted by rising inflation. By 2025, the situation had changed radically. The insurance regulator (ACPT) reported an average return of 2.65% net of management fees for these investment vehicles, which constitute the secure component of life insurance policies. This figure marks a turning point in the hierarchy of risk-free investments and largely explains the massive return of savers to this product.
 

To fully understand what this figure represents, it is important to recall what a euro-denominated fund is. In a life insurance policy, the policyholder can choose between two main types of investment vehicles. On the one hand, there are unit-linked funds, which are invested in financial markets and may offer higher returns over the long term but come with no capital guarantee. On the other hand, there are euro-denominated funds, where the principal is fully guaranteed by the insurer, which invests the bulk of the funds collected in high-quality government bonds and corporate debt securities. It is this second option—considered conservative and reassuring—that is currently experiencing a spectacular resurgence.
 

A return that now outperforms bank savings accounts
The macroeconomic context largely explains this renewed interest. Since August 2025, the Livret A rate has been lowered to 1.70%, then to 1.50% at the start of 2026, automatically following the decline in inflation. Term deposit accounts, which had benefited from the rapid rise in key interest rates in 2022–2023, are also seeing their returns erode as central banks ease their monetary policy. Against this backdrop, a euro-denominated fund offering 2.65% now tops the rankings for risk-free investments—a situation not seen in several years.
 

The argument becomes even more compelling when viewed in real terms. With inflation returning to moderate levels in 2025—around 0.9%—the inflation-adjusted return on euro-denominated funds is approximately 1.75%. In other words, savers are not merely preserving the value of their money—they are actually increasing their purchasing power, which had not been the case between 2021 and 2023, when rising prices far outpaced the returns paid by insurers.
 

This trend was reflected very clearly in savings flows. Net inflows into life insurance—that is, the difference between the amounts deposited by savers and the amounts they withdraw—reached an exceptional level of 44 billion euros for the full year 2025. This amount is nearly double that of the previous year and represents the best result seen since 2011. At the same time, traditional bank deposits—particularly standard savings accounts and savings passbooks—recorded net outflows, a sign that households have deliberately shifted their funds toward life insurance.
 

Savers have shifted their investments en masse
Beyond the return on investment alone, life insurance retains a significant structural advantage: its tax treatment. After an eight-year holding period, gains are subject to a reduced tax rate along with annual deductions, which significantly improves the net return received by the saver. 

Combined with the principal protection offered by euro-denominated funds, this feature makes it a particularly suitable option for those who prioritize security without wanting to sacrifice a decent return. For many French people, it also remains an advantageous vehicle for wealth transfer, thanks to specific exemptions from inheritance taxes.
 

The message emerging from the past year is therefore quite clear. In an environment where interest rates on regulated savings accounts are falling and inflation is easing, euro-denominated funds have regained their place in the portfolio of the cautious saver. This trend could continue as long as market conditions remain favorable for insurers’ bond portfolios, although experts note that a potential resurgence in inflation or a shock to the bond markets could change the equation.