In a global context marked by growing dependence on emerging markets and a creeping trade war, European reindustrialization has now become a strategic priority. Rémi Douchet, co-founder of iVesta Family Office, shares his vision and advice for private investors and family offices looking to capitalize on this major turning point.
“We have traded our factories for servers, at the cost of increased dependence”
For several decades, Europe—like the United States—has seen its industrial base shrink drastically in favor of services and technology. “In the United States, industry’s share of GDP has fallen from 25% in 1960 to about 10% today; in Europe, it has dropped from 29% in the early 1990s to 23% in 2023,” explains Rémi Douchet. This deindustrialization is accompanied by a decline in weight within stock market indices: the share of industrial stocks in the S&P 500 has fallen from 15% to 8.2%, a similar trend observed in Europe.
This massive shift to countries with low labor costs has certainly fueled growth in the service sector, but at the cost of a dangerous dependence, both geopolitically and economically.
The health crisis, followed by the war in Ukraine, has highlighted this vulnerability. European industrial supply is no longer sufficient to meet its needs, causing inflation and risks in supply chains. “It’s not just a matter of masks, but also of healthcare, defense, energy, and semiconductors,” notes Rémi Douchet. This realization has led to massive investment plans: 800 billion for defense in Europe, 500 billion in Germany to modernize industrial production.
Where to invest? SMEs, mid-cap companies, and small caps at the heart of the recovery
Faced with this industrial resurgence, family investors must position themselves with discernment. Rémi Douchet highlights industrial SMEs and mid-cap companies, particularly European and American small caps, which are often undervalued and heavily exposed to the industrial sector. “Our analyses show that these European small-caps have an average exposure of 25% to the industrial sector, but some of the funds we select reach up to 50%. These are companies with solid fundamentals, low valuations, and little correlation with major tech trends,” he explains.
Unlisted investment funds are also playing an increasingly important role. They finance reshoring, the energy transition, and the automation of production lines. For example, some European funds are betting on Italian companies specializing in energy logistics or textile production, while other U.S. funds are focusing on aerospace and its strategic components.
Addressing the reality of China’s industrial tensions
China’s industrial and technological rise now poses a complex challenge for Western economies. After decades of outsourcing, Europe and the United States are facing a competitor capable of rivaling them in strategic sectors. This shift is prompting stakeholders, particularly family offices, to reassess their investment strategies, taking into account the risks associated with dependence on global supply chains dominated by China.
In this context, a refocus on industrial assets located in Europe and the United States appears to be a solution for strengthening portfolio resilience in the face of geopolitical uncertainties. This positioning aims to support economic sovereignty—perceived as strategic—while seeking to secure wealth over the long term.
Increased sensitivity to industrial sovereignty
This growing awareness is accompanied by increasing interest in industrial sectors considered strategic, particularly defense. While the debate persists over the line between legitimate defense and the arms industry, it is notable that appetite for these sectors has increased, particularly since the outbreak of the conflict in Ukraine.
Beyond geopolitical considerations, this trend reflects a desire to align investments with issues of sovereignty and sustainability, for example by incorporating funding for the energy transition. However, this trend also raises questions about the balance between financial returns, ethical responsibility, and geopolitical risks.
Pragmatic advice for private investors
In conclusion, Rémi Douchet recommends striking a balance between pragmatism and strategic vision: “We must maintain a down-to-earth approach when selecting opportunities, reconciling economic interests with strategic imperatives.” Private investors have a key role to play in this reindustrialization, by diversifying their portfolios into promising industrial sectors while closely monitoring geopolitical developments and public policies.
“Reindustrialization is a powerful catalyst that creates value and secures wealth. It is a historic moment where financial interests and the duty of sovereignty align,” he concludes.
