When it comes to European financial instruments, opportunities are available to fund managers who register and qualify for the marketing of European Venture Capital Funds (EuVECA) and European Social Entrepreneurship Funds (EuSEF).
These collective investment schemes and the associated EuVECA and EuSEF regulations aim to improve access to funding for growing companies by allowing market participants to invest in small and medium-sized enterprises (SMEs) and social ventures throughout Europe. EuVECA-labelled funds aim to support new and innovative firms while EuSEF-labelled funds have a greater focus on investment in ventures whose objective is to have a positive social impact.
For a fund to be labelled under EuVECA or EuSEF regulations, it should be established in the European Union (EU) and qualified as an alternative investment fund (AIF) under the Alternative Investment Fund Managers Directive (AIFMD). The fund should further be projected to invest 70% or more of its aggregate capital contributions and uncalled committed capital in defined "qualifying investments" and not use leverage (other than in strictly limited circumstances).
Moreover, the alternative investment fund manager (AIFM) of a EuVECA or EuSEF must be established in the EU and registered with its home regulator. In addition, it should manage assets below the threshold set out in Article 3(2)(b) of the AIFMD. That is, managing unleveraged portfolios of less than €500 million with a minimum five-year lock-in.
Marketing passport under AIFMD
In return for compliance with the AIFMD, qualifying funds may opt in to an EU-wide marketing passport, under which an AIFM, registered in one member state, may market qualifying funds as a EuVECA or EuSEF (as applicable) in all other member states to clients, other investors investing at least €100,000 (who are well aware of the inherent risks of investment), executives, directors and employees involved in the management of the EuVECA or EuSEF.
Need some help?
IQ-EQ is experienced in the set-up and administration of EuVECA and EuSEF funds across a number of jurisdictions. We provide services suited to all stages of the fund lifecycle, including a full suite of AIFMD compliance solutions. If you would like more information, please contact me:
E: [email protected]
T: +31 20 522 24 69