It’s a proposal that aims at boosting investment into venture capital and social projects, the one brought forward by the European Commision last July. With the objective of making it easier for investors to invest in small and medium-sized innovative companies, the Commission is proposing to open up the EuVECA and EuSEF fund labels to fund managers of all sizes, and to expand the range of companies that can be invested in. The proposal also aims to make the cross border marketing of EuVECA and EuSEF funds cheaper and easier by explicitly prohibiting fees levied by Member States and simplifying registration processes.
These reforms are a part of a range of measures the European Commission is taking to stimulate venture capital in Europe. They include the use of EU budgetary support to attract capital from major institutional investors through a pan-European venture capital fund of funds, as well as promoting best practices in national tax incentives for venture capital to foster investment in SMEs and start-ups. The European Commission will also provide technical assistance to those Member States who wish to develop market-based finance, such as venture capital.
The Commission proposes to extend the range of managers eligible to market and manage EuVECA and EuSEF funds to include larger fund managers, i.e. those with assets under management of more than €500 million. Large managers can provide economies of scale and trusted brands, offering benefits for investors who in turn can invest more for the ultimate benefit of venture capital and social enterprises. The proposal also aims at expanding EuVECA eligible assets, to allow investment in small mid-caps, and SMEs listed on SME growth markets. This is expected to allow more companies to benefit from EuVECA investments and make investments more attractive through greater diversification of risk. Decreasing the costs explicitly prohibiting fees imposed by competent authorities of host Member States, is salso part of the proposal, all the while simplifying registration processes and determining the minimum capital to become manager.
The European Venture Capital Funds (EuVECA) and European Social Entrepreneurship Funds (EuSEF) regulations set up two new types of collective investment funds to make it easier and more attractive for investors to invest in unlisted SMEs. Both Regulations were adopted on 17 April 2013 and came into force on 22 July 2013.
The EuVECA and EuSEF label allows fund managers to market these funds across the EU to professional investors and to non-professional investors able to commit a minimum of €100,000.
Given the importance of making progress towards the Capital Markets Union, the Commission decided to bring forward the general review originally planned for July 2017. The European Commission launched a consultation on 30 September 2015 to ask whether targeted changes to the Regulations could boost the take-up of these investment funds. The review identified a number of factors holding back the development of these funds. The proposal is a result of this consultation. As part of the wider CMU package to stimulate venture capital investments in the EU, a pan-European venture capital fund of funds will combine EU financial sources with greater volumes of private capital. This pan-European fund of funds should help to overcome market fragmentation and attract private investors to the EU venture capital asset class.
Photo: F. Lefrebre