EuVECA & EuSEF: Update
Of relevance to:
Managers of EuVECA/EuSEF funds; full-scope AIFMs; managers of funds which may qualify as EuVECA/EuSEF funds
The concept of a European Venture Capital Fund (“EuVECA”) and a European Social Entrepreneurship Fund (“EuSEF”) has been in existence for around three years – see e.g. Regulatory Roundup 47 for an overview of these funds.
A EuVECA or a EuSEF is effectively a fund designation which EU managers can apply to qualifying portfolios (as defined in the respective Regulations) whose total AuM do not exceed €500m. That figure is, of course, the exemption threshold in Article 3(2)(b) of the AIFMD, below which a lighter touch AIFMD regime applies (small AIFM).
The designations are optional rather than compulsory but those small AIFMs whose AIFs meet the qualifying requirements and do so elect for the designation benefit from being able to market those funds across the EU, both to professional investors and to other investors that meet certain requirements (including a minimum investment of €100,000).
The European Commission (“EC”) has proposed a Regulation to amend the Regulations governing EuVECAs and EuSEFs.
Interesting statistics from the Explanatory Memorandum associated with the proposed Regulation show that as of the beginning of April 2016 there were 70 EuVECA funds registered in the ESMA database, but only four EuSEF funds (one in France and three in Germany).
The EC proposes three main amendments:
- Expanding the number of managers who are able to offer these funds;
- Expanding EuVECA eligible assets beyond the existing definition; and
- Making some changes to fee structures and registration processes to decrease costs for managers.
Highlights from the proposed Regulation include:
- Permitting full-scope AIFMs to market funds under EuVECA and EuSEF;
- Easing the eligibility criteria for investment under EuVECA;
- Requiring the Home State competent authority to inform the manager whether they have been registered no later than two months after all required information has been provided;
- Avoiding duplicate registration processes under EuVECA or EuSEF and AIFMD; and
- Providing that fees and other charges may not be imposed by competent authorities of host Member States in relation to cross-border marketing.