Irish Funds Responds To European Commission Venture Capital Consultation7 January 2016
Irish Funds has responded to the European Commission’s consultation on European Venture Capital Funds (EuVECA) and European Social Entrepreneurship Funds (EuSEF). The consultation forms part of the EU’s Capital Markets Union (CMU) initiative to promote investment in the European economy by providing alternatives to bank financing for businesses, such as via private equity and venture capital.
The EuVECA and EuSEF Regulations took effect on 22 July 2013 to coincide with the application of AIFMD. Since venture capital managers typically fall below the €500 million regulatory threshold for full compliance with AIFMD, they would not have been able to avail of the AIFMD marketing and management passport without opting in to full compliance. The objective was therefore to provide access to an EU passport for these types of funds under a lighter and more proportionate compliance regime. However, given the limited take-up of EuVECA and EuSEF funds and the policy focus on promoting non-bank finance, the Commission is consulting on enhancements that could be made to the EuVECA and EuSEF frameworks.
On the specific questions raised, Irish Funds has responded that:
- Authorised AIFMs (in addition to sub-threshold AIFMs) should be able to offer EuVECA and EuSEF funds
- Sub-threshold AIFMs managing EuVECA and EuSEF should be able to continue to benefit from the EU passport without triggering full compliance if these funds subsequently exceed the regulatory AuM threshold
- The use of EuVECA and EuSEF should be extended to non-EU managers
- Local marketing notification fees, registration and gold-plating requirements should be reviewed to remove cross-border barriers and promote fair competition
- Minimum own funds requirements should be harmonised in a proportionate manner at EU level
- Changes to the portfolio rules should be made to facilitate greater investment flexibility, particularly in relation to the definition of an SME and investing via loan origination.