It’s not been a great week for the FTSE 100, but 3i (LSE:III) has had it worse than most. The shares are down 7.4% this week, and I think the reason lies across the Channel.

French Prime Minister Sébastien Lecornu says Paris won’t “yield an inch” to protesters. 3i shareholders might wish their share price had shown the same resolve.

A fallen giant

Not so long ago, 3i was the best-performing FTSE 100 stock over 10 years. And the reason was simple – the private equity firm’s investment in European discount retailer Action was going spectacularly.

Success, however, has a side effect. Action now makes up around 75% of 3i’s portfolio – and the firm keeps leaning in and buying more.

France is Action’s biggest market. But three weeks of student protests, public sector strikes, and anger over fuel prices have raised questions about the strength of the French consumer.

The link isn’t direct. It’s more like this:

• Unrest raises concerns about the French economy.
• Economic concerns could put pressure on consumer spending.
• Weak consumer spending could weigh on Action’s sales growth.
• Faltering sales growth could affect how investors value 3i’s stake in Action. 

The last step matters because 3i values Action internally at 18.5 times EBITDA. That’s a lot for a retailer, especially one where like-for-like sales growth slowed to 3.6% in the first half of 2026.

Hardly any company is immune to the wider economy. But the risk with 3i is that it has so much of its portfolio riding on one business.

What matters for investors

3i’s success in recent years hasn’t been an accident. The stock took off around 2015 – when it shifted to investing its own balance sheet rather than raising outside money for private equity funds.

Most private equity firms invest external capital.  But that immediately creates two problems:

• Investors expect returns within a set timeframe, which may or may not be achievable.
• As Terry Smith points out, money tends to show up at the wrong time – when things have gone well and prices are high.

3i has been burned before – it needed a heavily dilutive £732m rights issue in 2009. But it’s on a much stronger footing now, which allows it to invest counter-cyclically.

That’s what made the Action investment possible. And to some extent, the size of its stake in the company relative to its other investments is a symptom of success, not a bug.

Importantly, investors buying 3i shares today aren’t paying 18.5 times EBITDA for Action. With the stock below the firm’s net asset value, the effective multiple is lower:

I think a multiple of around 14 is much more realistic for this type of business. It’s fundamentally a retailer, but it has unusual growth prospects in that industry.

Bottom line

The situation in France exposes the risks of 3i’s concentration. But I think the core strengths – permanent capital and a remarkable asset – are significant and remain firmly intact.

I’m a long-term buyer. And with the stock unusually cheap, I’m looking to add to my investment.

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Stephen Wright owns shares in 3i Group.