What to invest in through a holding company: cash management, real estate, private equity

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Knowing what to invest in through a holding company is a central question for any business owner or executive with surplus cash, whether it comes from dividends remitted by subsidiaries or from the proceeds of a business sale. Rather than leaving this capital idle, a holding company allows it to be put to work within an advantageous legal and tax framework, with a clear goal: optimising taxation, diversifying wealth, preparing for succession and seeking long-term performance.

The challenge is choosing the right investments based on your objectives, time horizon and risk tolerance. This guide covers the holding company structure, its tax and wealth benefits, the available asset classes, the share-for-share exchange mechanism and allocation strategies based on the holding company's profile.

What is a patrimonial holding company?

A holding company is a company whose primary purpose is to hold stakes in other companies — its subsidiaries. When its role is to manage and grow wealth rather than run an operating business, it is referred to as a patrimonial holding company. Most commonly subject to corporate tax, it centralises dividends from subsidiaries, available cash and the executive's financial assets.

This structuring tool serves several purposes: optimising the tax treatment of cash flows, protecting and diversifying wealth, planning succession, financing an acquisition through an LBO structure and efficiently reinvesting the proceeds of a sale. It is precisely because it often holds surplus cash that the question of investment arises.

Why invest through a holding company?

Investing through a holding company offers advantages that are difficult to replicate through direct ownership, starting with the tax treatment of income.

Corporate tax and the parent-subsidiary regime

Dividends remitted from a subsidiary to the holding company benefit from the parent-subsidiary regime: 95% of the amounts received are exempt from corporate tax, with only a 5% cost and expense allowance remaining taxable. In practice, the effective tax rate on these dividends falls to around 1.25%, compared to a far heavier burden if distributed directly to the executive. The holding company thus retains almost its full investment capacity to redeploy these sums, provided it holds at least 5% of the subsidiary's capital for at least two years. It remains subject to corporate tax on its own results, at a rate of 15 to 25% depending on the circumstances.

Wealth protection and flexibility

The holding company separates professional and personal assets and centralises asset management. It facilitates governance, diversification and succession planning (gift of shares, dismemberment, Dutreil pact for business transfers). This flexibility makes it a preferred vehicle for building a long-term wealth strategy.

Tax deferral through share-for-share exchange

For an executive selling their business, the share-for-share exchange mechanism allows the capital gains tax to be deferred by contributing the shares to a holding company before the sale. A powerful mechanism, detailed further below, which is however conditional on reinvesting a portion of the sale proceeds.

What investments can a holding company make?

A holding company can hold a wide range of assets, from the most liquid to the longest-term. The challenge is to build an allocation consistent with its objectives, balancing liquidity, horizon and risk.

Cash management instruments (term deposits, capitalisation contracts)

For stable or pending cash, term deposits offer a guaranteed return at maturity with no capital risk. A capitalisation contract, taken out by the legal entity, allows euro funds and unit-linked investments to be held within a straightforward accounting framework. These instruments provide availability and security, at the cost of a moderate return.

Real estate through an SCI or SCPIs

Real estate remains a cornerstone. The holding company can invest directly through a real estate holding company (SCI) it owns, or indirectly through collective vehicles such as SCPIs and OPCIs, which pool risk and pay regular rental income. Real estate provides yield and decorrelation, but with limited liquidity.

Equities and securities

A holding company can invest in equities through a securities account, in shares, bonds, funds or ETFs. However, being subject to corporate tax, it is taxed annually on unrealised gains from certain securities and cannot benefit from the tax wrappers available to individuals (PEA, life insurance). Equity investment through a holding company is most justified as a diversification strategy with a defined horizon.

Private equity and unlisted assets

Private equity involves investing in unlisted companies, from startups to mature SMEs. It is often the most suitable investment for a holding company: its long horizon matches the capital lockup required by this asset class, and its performance makes it a powerful diversification driver. Over ten years, French private equity has delivered a net return of 12.4% per year, compared to 8.9% for the CAC 40 with dividends reinvested (France Invest/EY, data as of 31/12/2024).

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Long reserved for institutional investors due to inaccessible minimum tickets, often reaching several hundred thousand euros when investing directly, unlisted assets are now opening up to holding companies through pooled structures. Platforms such as Fundora structure access to private equity through a professional private equity fund (FPCI) and dedicated vehicles (SPVs) that pool subscriptions, with effective management handled by Kyoseil Asset Management, an AMF-approved asset manager, under a mandate. A holding company can thus access private equity strategies that were previously out of reach. The performance targets displayed are objectives, not guaranteed returns, and unlisted investment carries a risk of capital loss and low liquidity. To go further, discover how to invest in private equity and invest in unlisted assets.

Private debt and crowdfunding

Finally, a holding company can diversify into private debt funds, real estate crowdfunding or crowdequity, which offer potentially high returns in exchange for default risk and limited liquidity. These solutions complement an allocation without forming its foundation.

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Share-for-share exchange: reinvesting after selling your business

The share-for-share exchange mechanism (Article 150-0 B ter of the French Tax Code) is a major tool for executives selling their company. The principle: contribute the company's shares to a holding company before the sale, which places the capital gain in a tax deferral position. The holding company then sells the shares and has full use of the sale proceeds, with no immediate tax cost.

In return, if the sale takes place within three years of the contribution, the holding company must reinvest at least 60% of the sale proceeds into an eligible economic activity within two years, in order to maintain the deferral. Certain private equity funds (FCPR, FPCI) may, subject to meeting their eligibility conditions and quotas, qualify as eligible reinvestment vehicles, in the same way as an investment in SMEs. Eligibility must be validated on a case-by-case basis with an adviser, as the criteria are precise. This mechanism explains why so many post-sale holding companies turn to private equity.

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Choosing investments based on the holding company's profile

There is no universal allocation: the right strategy depends on the origin of the cash, the time horizon and liquidity needs.

Post-sale holding company

After a sale, the priority is often the share-for-share exchange reinvestment and preserving the tax deferral. Private equity and eligible funds play a central role, complemented by real estate and a secure cash pocket for flexibility.

Holding company with regular dividends

A holding company receiving recurring dividends from its subsidiaries will favour a balanced allocation: cash management instruments for current flows, real estate and private equity for long-term performance, calibrated to the executive's risk tolerance.

Getting professional support to structure investments

Structuring a holding company's investments requires combining corporate law, taxation and financial strategy. A consulting firm or wealth management adviser helps size the allocation, secure the eligibility of reinvestment vehicles and adjust the strategy over time. This is the best guarantee of extracting the full potential of the holding company without unpleasant tax surprises. To compare unlisted and listed markets, read our analysis on building a diversified portfolio, and to assess the potential of unlisted assets, our breakdown of private equity return.

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FAQ: investing through a holding company

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What can a holding company invest in?

‍A holding company can invest across a wide range of assets: cash management instruments (term deposits, capitalisation contracts), real estate through an SCI or SCPIs, listed securities via a securities account (equities, bonds, ETFs), private equity and unlisted assets, as well as private debt and crowdfunding. The choice depends on its objectives and time horizon.

What can a holding company buy?

‍Beyond stakes in its subsidiaries, a holding company can acquire fund units (FPCI, SCPI, UCITS), listed securities, real estate through dedicated structures, or take out capitalisation contracts. It buys in its own name, using its cash, within the corporate tax framework.

Can a holding company invest in the stock market?

‍Yes, through a securities account in the company's name. However, it does not have access to the tax wrappers available to individuals (PEA, life insurance) and, being subject to corporate tax, is taxed on results including certain unrealised gains. Stock market investment through a holding company is primarily a diversification strategy.

How does a holding company generate returns?

‍A holding company generates income in several ways: dividends remitted by subsidiaries (lightly taxed under the parent-subsidiary regime), capital gains and income from investments (real estate, private equity, equities), and interest from cash instruments. These flows, subject to minimal tax on entry, are reinvested to compound over the long term.

What are the drawbacks of a holding company?

‍A holding company involves costs and ongoing management: incorporation fees, accounting, legal and reporting obligations. It does not provide access to individual tax wrappers and its benefits depend on a sufficient volume of assets. Finally, extracting funds to personal wealth remains taxable. Professional advice is recommended to assess whether it is appropriate.

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