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Could Axa’s Sonepar deal spark life into Europe’s SME funding market?

French insurer has big plans for a novel way of providing corporate finance.

Axa, the French insurance company and asset manager, announced at the start of August that it had signed a euro-denominated private placement financing for Sonepar, an independent family-owned French company with a global market leadership in business-to-business distribution of electrical products and related solutions. It is the first French company to benefit from what Axa calls a new type of disintermediated financing.

Axa has large volumes of assets under management invested in government bonds, bank bonds and bonds of large-cap investment-grade corporates: the traditional asset classes for fixed-income investors that once promised high liquidity, moderate risk and reasonable yields. But large portions of the first two and biggest categories, government bonds and bank bonds, now carry much higher risks, reduced liquidity and pronounced correlation. While corporate bonds, the new safe-haven category, pay returns that are grinding ever lower; the less risky high-quality government bonds are paying negative yields.

Axa and other large insurance company investors like it have a problem. The answer: lending to companies from outside the ranks of the leading equity indices and seizing the chance to build diversity and yield.

Odette Cesari, chief investment officer at Axa, says: "We have been investing more into the debt of private companies for the past six or seven years, but now face a constraint of size.

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