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META contribution to the EC Public consultation on the CMU


META welcomes the opportunity to contribute to the Capital Markets Union debate.

What further measures could help to increase access to funding and channelling of funds to those who need them?

META (through its daughter company  Zernike  META  Ventures)  has  over  20    years  of  experience  in    managing  and implementing early stage funds, currently  managing 8  funds in Italy, Slovenia  and Poland. Based   on  this experience META believes  that  developing and speeding up  the use   of financial  instruments  and   in  particular  equity  instruments  is   crucial    to  foster   the competiveness  of   European  regions  and   countries.  META  puts  forward  the  following recommendations to increase  access to funding:

  • While  it  is  important   to  take  measures,  which  allow  venture  capital  funds  to  reach certain scale, in complementary, special  attention should be  also  given to  support  the development of regional coinvestments funds of  adequate size (e.g. no  less than 20  mill EUR)    which  stimulate    and  leverage  the  local    community  of  investors.    Small    regions should join  forces to reach funds critical mass  e.g. 4  funds  of 10  mill EUR would not reach the same  level of quality of management   and  results as  one fund  of 40  Mill EUR. META fully  supports  the  design  of  a  “European  Multilevel  Financial  Eco-System”  with   an increasing   involvement  of  local  finance  providers  and   intermediaries  who   are  familiar with local market conditions and  needs, acknowledging the  statement recently made  by the European Commissioner Mr.  Hill, “small and  micro-firms will still look to local funding mechanisms  to provide capital in their  start-up and expansion phases”.

  • Design a simplified and harmonized regional cooperative framework between  managing authorities, especially with reference to interregional agreements on the operational plans.
  • Providing   business   angels   with   a   European   passport   to   facilitate   cross   border investments  and   coinvestments  with  other  early    stage  investors.  This  measure  would allow  them   to benefit  from the same  fiscal incentives as  if they were investing in their own country.

  • Extend the scope of  the EUVECA  passport to allow (sub threshold) fund managers to market  and   manage  AIFs  in  different  member  states  without  having  to  comply  with  28 different national rules.
  • META  believes  that  promoting  exits  opportunities  for  venture  investors  should  be enhanced but also for bussiness angels. Post angel secondary funds, funded by public and corporate or private investors could help to reduce the lenght of time to exit.

How can the EU further develop private equity and venture capital as an alternative source of finance for the economy?
META  firmly  believes  that  the  use  of  equity  finance  can  play  a  crucial  role  in  supporting young, innovative companies with strong  growth potential, improving the efficiency of the financial  market by  creating new investment opportunities and tackling the current EU’s Venture capital market underdevelopment.

Nevertheless, as  stated in the  European Commission SWD  accompanying the CMU  green paper [COM (2015) 63  final],“notwithstanding the benefits associated with well-developed and  functioning capital markets, size alone is  not necessarily the only important factor  – composition matters too. Larger capital  markets do not necessarily deliver positive effects for  the  real  economy  -  nor  does  size  guarantee  market  liquidity  when  it  is  most crucial, that is, in times of stress”.

According to META’s  experience the use of co-investment funds of adequate size (e.g.  not less  than  20 million  euro)  within  the  European  Structural  and  Investment  Funds  (ESIF) framework, could speed up the equity market and increase the diversification of the source of funding through the involvement of local  community of private investors and business angels that  can successfully contribute to the setting-up of an optimal  match of financing needs with financing capacity.

META believes that the exit  opportunities for  venture capital investors could be  enhanced by  supporting  the  development  of  Post  Angels  Funds,  funded  by  Public  and  Corporate investments, which would help to reduce the length of time to exit.  Long investment time horizons restrict  the angels’ ability to reinvest in new  companies, and requires spending more  time  to  support  portfolio  companies  and  less  to  select  new    start-ups  to  fund.Moreover, angels groups must recruit new  members in order to remain active. Much of the Angel group managers’ time is spent seeking new memberships in an attemp to adress investor fatigue.

In particular, what measures could boost the scale of venture capital funds and enhance the exit opportunities for venture capital investors?

META underlines that the objectives of the Single Market Act in relation to venture capital and  to  the  AIFMD  are  different.  While  the  AIFMD  aims  at  increasing  transparency  and facilitating the monitoring of systemic risk in the field  of the AIFs, the venture capital funds are not likely to either pose important systemic risk to the financial system, nor to create specific investor protection concerns.

Nevertheless,  taking  into  account  that  the  majority  of  the  venture  capital  business  in Europe lies below the EUR 500 million threshold (“Sub threshold  managers” according to the  article 3  of  the AIFMD), and that they do not benefit from the AIFMD Management passport, unless they decide to make use of the opt-in procedure envisaged in the AIFMD, META firmly believes that  the scope of  the EuVECA passport  should  be extended.

In   this   concern   META   underlines   that,   on   the   one   hand   it   would   seem   to   be disproportionate  to  require  venture  capital    managers  that  aim  at  managing  AIFs  in  the different  EEA member states to comply with the strict AIFMD requirements in exchange of  the  AIFMD passport, and  on  the other hand smaller managers will be  encountering a detrimental  treatment  as  compared  with  the  bigger  ones,  being  compelled  to  bear  high costs  in  case  they  decide  to  manage  AIFs  in  another  EEA  member  states,  taking  into consideration  the  differences  in  legislation  and  administrative  requirements  within  the existing  national regimes in  the EEA.

Such  extension should be undertaken not just widening the range of  the EuVECA market participant  to  larger  funds  managers  (that  can  already  benefit  from  the  managing  and marketing  AIFMD  passport),  but  extending  the  scope  of  the  EuVECA  from  a  merely marketing to a Managing regime for the benefits of  the subthreshold Managers.

In  doing  so,  there  will  be   an  increasing  number  of  Managers  (especially  sub  threshold Managers) that will increasingly resort to the EuVECA voluntary regime for  the marketing and managing of  AIFs in different EEA member states  without having to  comply with 28 different national rules. For the  abovementioned reasons, META calls for an extension of the scope of the EuVECA passport in order to create an  harmonized regulatory framework for the Management and  Marketing of  AIFs by  subtreshold managers of AIFs in the EEA. META  firmly  believes  that  such  a  measure  will  sucessfully  contribute  to  redefine  these financial  market  participants  in  the  EEA  legal  infrastructure,  to  create  a  common  and consistent  interpretation  across  the  EEA  and  increase  the  number  of  larger  and  smaller funds that will make use of the EuVECA Regulation.

You can download the PDF here.

For more information please contact:

Luca Pira
Tel. +32 221 730 86