3i Group, one of the FTSE 100’s most celebrated private equity stocks, has endured a bruising week, with shares falling 7.4% amid growing uncertainty in France.
The decline is closely linked to unrest across the Channel, where three weeks of student protests, public sector strikes, and anger over fuel prices have rattled sentiment about the French economy.
France is the biggest market for Action, the European discount retailer that sits at the heart of 3i’s investment portfolio and its extraordinary long-term returns.
Action now accounts for around 75% of 3i’s portfolio, a concentration that has amplified both the firm’s remarkable gains in recent years and its current vulnerability to French economic turbulence.
The chain of concern runs through several steps: unrest raises fears about the French economy, those fears could dampen consumer spending, and weaker spending could weigh on Action’s sales growth.
That matters enormously for 3i because the firm values its stake in Action internally at 18.5 times EBITDA, a significant premium for a retailer whose like-for-like sales growth slowed to 3.6% in the first half of 2026.
French Prime Minister Sébastien Lecornu has said Paris will not “yield an inch” to protesters, though 3i shareholders might wish their share price had demonstrated the same resolve this week.
The concentration risk is not lost on long-term observers of the stock, which was once the best-performing FTSE 100 company over a 10-year period, largely on the back of the Action investment.
3i’s business model is structurally different from most private equity firms, having shifted around 2015 to investing its own permanent capital rather than raising external funds with fixed return timelines.
That model, as investor Terry Smith has noted, avoids the problem of outside money arriving at the wrong time, when assets are expensive and the cycle is already mature.
The firm’s permanent capital structure also allowed it to invest counter-cyclically and build its position in Action at a time when others could not, which explains much of its subsequent outperformance.
3i was not always in such a strong position, having required a heavily dilutive £732m rights issue in 2009, but its current balance sheet provides considerably more resilience and flexibility.
For investors considering the stock today, the effective valuation of Action is lower than the internal 18.5 times EBITDA figure, since 3i’s shares are currently trading below the firm’s net asset value.
A multiple of around 14 times has been suggested as more realistic for a business that is fundamentally a retailer but carries unusual growth prospects within that sector.
Despite the French turbulence exposing the risks of 3i’s concentration, the core strengths of permanent capital and a genuinely remarkable underlying asset remain firmly intact for those with a long-term perspective.