Small and growing companies should soon see increased access to venture capital funding, after the EU agreed yesterday on reforms to the European Venture Capital Funds (EUVECA) regulations.
The changes will promote jobs and growth, according to the European Commission, by broadening the range of businesses which venture capital funds can invest in.
They will also allow larger managers to market funds falling under the EUVECA regulations, with the aim of providing economies of scale to investors.
“The agreement removes another barrier to venture investment at EU level. The reforms we have agreed – expanding investment possibilities for funds, broadening the range of eligible managers and simplifying administration – will help investor capital reach the small and medium-sized enterprises (SMEs) that need it,” said the commission's vice president Valdis Dombrovis.
The EUVECA rules were brought in as an antidote to the Alternative Investment Fund Managers Directive (AIFMD), which regulates hedge, private equity and real estate funds along with other “alternatives”.
The rules exempted venture capital funds from various aspects of the AIFMD, including the high capital requirements and the obligation to appoint a depositary to monitor the fund.
A review of the EUVECA regulations was scheduled for July this year, but the European Commission brought the process forward to speed up the progress towards Capital Market Union (CMU).
The reforms, agreed upon by the European Parliament and the Council, mean that larger fund managers with more than €500m of assets under management are now permitted to manage funds which can still fall under the EUVECA regulations.
The commission hopes this will extend the range of managers available to investors, while passing on economies of scale by allowing them to diversify their business across one manager.
Additionally, the reforms should increase the number of businesses which are eligible for venture capital funding, beyond unlisted SMEs.
EUVECA funds will now be allowed to invest in small mid-cap companies and small and medium-sized enterprises (SMEs) listed on growth markets.
The commission also agreed to prohibit fees charged by national authorities, unless they are performing a supervisory role.
Last year, European private equity and venture capital investments totaled €53.7bn, the second highest amount since 2008, according to industry trade body Invest Europe.
Almost 6,000 companies across the continent benefited from this investment, 83 per cent of which were SMEs.