EuVECA - Eureka? - A study on Private Equity fundraising via new EU regulation

Sammanfattning: During 2013 a new EU regulation on European Venture Capital Funds was carried out to simplify matters for AIFMs when marketing funds throughout the EU. Such AIFMs earlier had to comply with the full legislation of the AIFMD, which is an expensive process. Marketing in this context means the process of raising capital from professional and non-professional investors. The capital raised is subsequently invested in accordance with a set investing policy. The regulation sets a standard of rules for an AIFM to qualify for using the EuVECA designation in its fund marketing. It also classifies certain investment undertakings as qualifying and others as non-qualifying. The fund shall at all times have a certain percentage of qualifying investments in its portfolio, which is expressly stated in the regulation. The regulation has however not been applied to its intended extent. To date, there are only 45 registered EuVECA funds throughout the EU, six of which are based in Sweden. I have tried to identify what has caused these problems, and identified a great lack of knowledge. Both legal advisors and Venture Capitalists are largely unwitting of the regulation’s existence, and common practice is still to register AIFs under the full legislation of the AIFMD. In addition to this, I have examined if the regulation has potentially been inadequately promulgated, the second of Fuller’s eight principles of morality of law. Finally, I have presented a few possible solutions to make the regulation applied more extensively. One way is to amend the wording of the regulation, explicitly allowing more AIFMs to use it, and classifying more investments as qualifying. Futhermore, the national implementations of the AIFMD could refer to the regulation in chapters relevant to registration and marketing of AIFs. I also believe the regulation would benefit from being communicated more efficiently to relevant people. Exactly through what channels of marketing this should be done is beyond the scope of my knowledge, but I am of the view that the regulation would be more widely applied if communicated directly to law firms and PE firms.