Investing in French SMEs helps to bolster the local economic fabric nationwide as 50% of listed SMEs have their registered offices in regions outside Paris. It also helps to create jobs. Between 2009 and 2019, ISEs (Intermediate-Sized Enterprises) created 7 times more jobs in France than large companies did.

Let us provide some examples. ID Logistics is a company that was listed in 2012; its French workforce, spanning the whole of the country, has almost doubled since then to 6,500 in 2019. Lectra opted to set up base in Bordeaux, notably for its most cutting-edge R&D activities, whereas its main rival relocated to China a long time ago; its French headcount has increased by around 50% over the past decade. Lumibird, meanwhile, has seen its staff numbers grow by 41% over a two-year period to a total of 604 by the end of 2019. Its hiring practices are geared towards training and retraining, and it promotes the occupational integration of people with few qualifications or who have left the job market. The company has set up a partnership with Pôle Emploi (France's job agency) to offer interviews in the form of skills tests.

Such investments are all the more compelling as SMEs generally have little debt and are prepared to get involved in the consolidation of their respective markets.

Trigano's exemplary handling of the 2008/2009 crisis enabled the camping-car manufacturer to shore up its balance sheet during that period and become the main consolidator in its market. The company is now Europe's no.1 with a market share of 20% (vs 10% in 2010).

SMEs controlled by their founders and/or family business entrepreneurs

SMEs controlled by their founders and/or family business entrepreneurs take a long-term view, which is promising as this approach ensures that the interests of the managers, shareholders, employees and clients are aligned. This contrasts with SMEs that are controlled by private equity funds, which tend to be more interested in generating IRRs in the short term. Voyageurs du Monde provides a good example. It is run by a trio of founders and core shareholders and is a particularly innovative company despite operating in a mature market. It is a pioneer in many respects as regards the non-financial issues involved in its line of business, while also being among the most profitable firms in its sector.

Shared interests are definitely a beneficial aspect of sound company management (low debt, substantial cash and/or assets, sensible external growth), which in turn allows for steady earnings growth. Alençon-based Hexaom, better known under its former name of Maisons France Confort, offers a prime example of a family-controlled company that has managed to become France's leading single-family homebuilder over time by applying a methodical hybrid model of organic and external growth. Hexaom maintains a very robust balance sheets that allows it to adjust the company and its business model depending on changing social circumstances. The recent lockdowns and the growing acceptance of remote working have revived aspirations among French citizens to live in a house with a garden, which should keep the company's order book full for the coming years.

We can thus see just how relevant this asset class is. Indeed, it is currently drawing inflows from institutional investors as they are attracted by the valuation gap that exists between SME/ISEs and large caps (this discount has widened in recent years) but are also interested in supporting the local industrial fabric.

Investors could become even keener in the future thanks to the PACTE Law on employee savings, which offers tax benefits for investment flows into SME/ISEs.