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EU Webinar #12: How EuSEF’s recent reform can impact the VP/SI sector EU Webinar Series #12 Wednesday 11 April 2018 | 15:00–16:30 CET
EU Webinar #12: How EuSEF’s recent reform can
impact the VP/SI sectorEU Webinar Series #12
Wednesday 11 April 2018 | 15:00–16:30 CET
WELCOME
Matteo Mascolo
Public Affairs Manager, EVPA
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Policy & Public Affairs @ EVPA
CatalystThought Leader
EU Webinar Series
25.06.2014 EU Webinar #1 | EuSEF Regulation
25.09.2014 EU Webinar #2 | Impact Measurement
05.03.2015 EU Webinar #3 | Social Impact Bonds in the EU
17.06.2015 EU Webinar #4 | How can VP/SI Practitioners access EU funding
23.09.2015 EU Webinar #5 | Social enterprises and Public Procurement
16.03.2016 EU Webinar #6 | Crowdfunding for Impact
21.06.2016 EU Webinar #7 | Ordinary People as Social Impact Investors
23.11.2016 EU Webinar #8 | EU Funding Update for VP/SI Practitioners
22.03.2017 EU Webinar #9 | Foundations & Social Impact – Going beyond grant - making
14.06.2017 EU Webinar #10 | The Sustainable Development Goals & VP/SI
12.12.2017 EU Webinar #11 | Fostering public private collaboration to address social issues
11.04.2018 EU Webinar #12 | How EuSEF’s recent reform can impact the VP/SI sector
Programme
Time Description Speaker
15:00 – 15:10Welcome to participants
Introduction to the topic, agenda and speakersMatteo Mascolo, EVPA
15:10– 15:25 EuSEF overview and the recent reformGiovanni Garcea, European
Commission
15:25 – 15:40 EuSEF - legal answers for practitioners. A case study. Roberto Randazzo, R&P Legal
15:40 – 15:55EuSEF: challenges and opportunities. Experience on the
groundOlivier de Guerre, PhiTrust
15:55 – 16:20 Q&A session (moderator and participants) All panellists
16:25 – 16:30 Summary and conclusions Matteo Mascolo, EVPA
How EuSEF’s recent reform can impact the VP/SI sector
EU Webinar #12 Introduction
• Why it is important now?
• What do we want to accomplish?
Welcome to our e-Speakers!
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Giovanni Garcea
European Commission
Olivier de Guerre
PhiTrust
Roberto Randazzo
R&P Legal
Giovanni Garcea
European Commission,
DG FISMA
‘EuSEF overview and the recent reform’
EuSEF - European Social Entrepreneurship Funds
11 April 2018
Agenda
1. Background
2. General presentation of the new rules
Agenda
1. Background
Capital Markets Union
• The top priority is boosting jobs and economic growth in Europe
• More difficult to get bank financing since the banking crisis
• Market-based financing can complement bank lending to provide alternativesources of finance
• A more diversified financial system creates a bigger range of financingoptions, particularly for SMEs
European Venture Capital Funds (EuVECA)European Social Entrepreneurship Funds (EuSEF)
WHY?• Facilitate access to funding for SMEs / Social Entrepreneurs• Facilitate investing in young & innovative SMEs / Social Enterprises• Achieve "critical size" for venture capital / social funds
HOW?• Creating a recognized EU brand for venture capital / social funds• Improving investor protection• Breaking down barriers to fundraising across Europe
EU fund frameworks (before the review)
AIF
AIFM > € 500m AUM
EuSEF EuVECA
ELTIF
UCITS
MMF
Main features of EuVECA and EuSEF
• EU-wide passport : uniform rules for fund marketing, portfoliocomposition, eligible investment instruments, conduct & transparency
• Invest at least 70% of capital in "qualifying investments"
• Flexibility in how they can invest e.g. equity, quasi-equity, debt, andother types of participation
• Strict limits on borrowing & leverage
• Open to professional investors & non-professional (min. €100.000 andstate in writing they are aware of the risks)
Agenda
2. General presentation of the new rules
Barriers
Focus of the Impact Assessment
• Remove limitations for larger asset managers
• More flexibility for investment targets
• Facilitate operations and decrease the costs for fundsoperating on cross-border basis
• Changes to the minimum requirements for non-professional investors (€100,000)
Asset managers
Allow AIFMD-authorised (i.e. large) managers to manage and market EuVECA and EuSEF funds
• will increase the funds available to invest in eligible companies
• will provide economies of scale and trusted brands
• will offer benefits for investors who in turn can invest more
• will ultimately benefit venture capital and social enterprises
Eligible assets
Expand the range of eligible assets
• EuSEF: will simplify and facilitate the participation of investors including the EU programmes managed by the European Investment Fund (EIF)
• EuVECA: will open to invest in small mid-caps and SMEs listed on SME growth markets
• will make funds more attractive to investors through creating more opportunities and allowing risk to be more diversified
Costs for launching and marketing
Clear requirements for the level of "own funds"
Simplified procedure and fees for cross-border marketing
Stronger role for ESMA
• will provide certainty and simplicity over requirements for the costs to set-up these funds
• confirming that no fees may be charged for marketing where there is no supervisory action, will offer further incentive to market more widely
• ESMA stronger role will ensure consistent and convergent practices among national Competent Authorises across the EU
Non-professional investors
No change: €100,000 minimum is maintained
• lowering the entry ticket for non-professional investors would inevitably need to be coupled by additional retail investor protection measures, which would only serve to detract from the ultimate benefit of more flexible EuSEF regime
Thank you
http://ec.europa.eu/finance
Roberto Randazzo
R&P legal
‘EuSEF - legal answers for practitioners. A case
study’
EVPA WEBINARRoberto Randazzo
Context and aim of EuSEF/EuVECA
European Social Entrepreneurship Funds (EuSEF) Regulation and the
European Venture Capital Funds (EuVECA) Regulation (together, the
Regulations) came into effect across the European Union (EU) on 22 July
2013.
EuSEF and EuVECA aimed to enhance market participants‘ opportunities to
raise and invest capital in innovative SMEs and social undertakings
throughout Europe.
EuVECAs are intended to support young and innovative companies
EuSEFs focus on investment in enterprises whose aim is to achieve positive
social impact
For a fund to qualify as a EuVECA or EuSEF, it must:
Be established in the EU
Be a “collective investment undertaking”, which would qualify as an“alternative investment fund” (AIF) under the Alternative InvestmentFund Managers Directive (AIFMD)
Intend to invest 70% or more of its aggregate capital contributions anduncalled committed capital in defined "qualifying investments“
Not use leverage (unless specifically allowed by the Regulations).
Requirements
Review of the Regulations
Uptake of the new fund types was below expected range
Only 34 EuVECAs - aiming to raise EUR 1.3bn in capital (comprehensively) -were registered (European Commission had forecasted EUR 4bn instead)
In the same period, only six EuSEFs were registered, with an aggregate capitaltarget of EUR 6m
Between September 2015 and January 2016, the European Commissionundertook, in parallel with its Capital Markets Union (CMU) Action Plan, a publicconsultation, which resulted in its February 2015 CMU Green Paper
containing the improvements which could be made to the existing regimes.
The Amending Regulation
Some important amendments were introduced with Regulation (EU) 2017/1991(the “Amending Regulation):
Initial capital set at €50 000 for both EuVECA and EUSEF funds
Minimum own funds are the same as above, while the percentage changesabove €250 000 000
Home MS competent authority must ensure that all information gathered in thefunds’ reports - including the annual report or audit(s - is made available torelevant competent authorities and ESMA
Authorities can impose restrictions or reject changes to the conditions forinitial registration
Market opportunity
Source: EUROSIF (2016) European SRI study
Case study – Main characteristics In 2017, an Asset Management Company (Società di Gestione del Risparmio, SGR) was
authorized by the Bank of Italy in order to establish and manage Alternative Investment Funds(fondi chiusi) with the EuSEF / EuVECA labels
The Asset Management Company has the purpose to launch and manage investment fundsdedicated to generate a measurable, positive social and environmental impact alongside afinancial return, targeting social enterprises
The Asset Management Company launched its first closed-end EuVECA/EuSEF Funddedicated to italian social economy enterprises
The Fund will promote the development and innovation of social enterprises in Italy,considered fundamental actors for the production, in a socially and environmentally sustainableway, of useful solutions to meet the needs of the whole community
Case study – Target
Source: EVPA (2016) A practical guide to venture philanthropy and social impact investment
Case study – Investment processSCOUTING Deal flow origination
FIRST SCREENING Initial screening assesing the eligibility of the beneficiary – definition of the
termsheet
DUE DILIGENCE Due diligence and drafting of the information memorandum
APPROVAL The information memorandum is shared with the Investment Committe and the
Risk Manager – the Senior Investment Managers take the final decision on the
investment
CLOSING Finalisation of the investment by drafting and signing all required investments
contracts
INVESTMENT MANAGEMENT Ordinary investment management activity with constant monitoring of the
beneficiary and the results achieved
EXIT At the expected time of disinvestment, the achievement of the predetermined
objectives will be verified again and the planned exit strategy will be put into
place
Case study – Investment instrumentsThe Fund will invest at least 70% of its aggregate capital contributions and uncalled committed capital in assets that are qualifying investments.
“Qualifying investments” means any of the following instruments:
• equity (minority or majority stakes) or quasi-equity instruments that are issued by:
• a qualifying portfolio undertaking and acquired directly by the fund from the qualifying portfolio undertaking,
• a qualifying portfolio undertaking in exchange for an equity security issued by the qualifying portfolio undertaking, or
• an undertaking of which the qualifying portfolio undertaking is a majority-owned subsidiary and which is acquired by the fundin exchange for an equity instrument issued by the qualifying portfolio undertaking;
• secured or unsecured loans granted by the fund to a qualifying portfolio undertaking in which the fundalready holds qualifying investments, provided that no more than 30% of the aggregate capitalcontributions and uncalled committed capital in the fund is used for such loans;
• shares of a qualifying portfolio undertaking acquired from existing shareholders of that undertaking.
Olivier de Guerre
PhiTrust
‘EuSEF: challenges and opportunities.
Experience on the ground’
The only one EUSEF in France !
PhiTrust Partenaires positioning
MINORITY SHAREHOLDER in SMES with strong social and/or environmental impact that is
mesurable
SUPPORT THE EMERGENCE of leaders by providing these SMEs with the highest standards of
management and accelerating their growth through our network and our experiences
PREPARE these companies for a change in scale to create or consolidate their social impact
Diversified
20 to 25 investments, with an average investment size of between 200 K€ and 800 K€ in 4
targeted sectors
Balanced
controlled risk through a mix of equity / debt with guarantees provided by Bpifrance for all
investments in France
Useful and measurable; during the last four years:
911.16 jobs created (or enabled) including 2 663 full-time jobs in portfolio's companies
604 jobs created for disabled persons
87.761 micro-entrepreneurs supported
427.863 number of unbanked persons now having access to mobile banking services
113.034 T of CO2 offset
PHITRUST PARTENAIRES:LEADER IN IMPACT INVESTING
Phitrust Endowment Fund
for Social Innovation
Investment reach:
European Union
Switzerland
Africa
Asia
Investments :
1/3 companies with the French
« solidarity » label
2/3 social enterprises as defined by
the European legislation
Support and mentor projects with
strong social and/or
environmental objectives
Financing provided:
Support to non-profit
organizations (grants and
technical support)
Investment in Phitrust
Partenaires
Phitrust Partenaires(Simplified joint stock company, VC company,
EuSEF)
Share capital of 15 M€ on 30/03/2018
20 M€ targeted for 2018
THREE « IMPACT INVESTING » TOOLS
Phitrust Partenaires Europe(Simplified joint stock company)
1er Closing with share capital of 17 M€ in
december 2016,
20 M€ end 2017 (10 M€ EIF)
Investment reach:
European Union and EU
candidate member countries
Investments:
100 % social enterprises
60 % in France
« IMPACT FIRST INVESTING » IMPACT ONLY
WHY CHOOSING EUSEF ?
LEGISLATION STRATEGY EUSEF
• AIFM directive is
inappropriate for « small »
P/E funds
• Selling funds in the EU is
not possible if you do not
have an agreement
• Large institutions cannot
invest in funds which are
not regulated
• Custodians an obligation
for funds (cost...)
• Invest in social
enterprises in France
and the EU
• Impact is the key driver
of the strategy, the
finacial return being an
mean,
• Investors invited to
participate in the
investment decision
• EU definition of social
enterprises is larger than
the French one
• Impact measurement
reporting is an obligation
for EuSEF managers
• Self regulated funds
possible with EuSEF
• No need of custodian (if
small size)
PHITRUST PARTENAIRES’ POSITIONING
Building on more than 10 years of experience and a portfolio of 20+ investees, PhiTrust Partenaires’ unlisted investments
continue to be granted the Finansol label indicating transparency and solidarity.
With more than 35% of its assets invested in companies that adhere to the French definition of ‘solidaire’, PhiTrust Partenaires
has been awarded the “Entreprise Solidaire” certificate since 2012
In 2014, the AMF (French Market Authority) registered PhiTrust Partenaires as a manager of a EuSEF (European
Social Entrepreneurship Fund). The EuSEF label identifies investment funds that invest at least 70 % of their assets in social
enterprises and that have implemented a methodology for measuring the social and/or environmental impact of these
investments. PhiTrust Partenaires is the first French investment manager to receive the EuSEF label.
Discussion with the regulator in France for the label
has been long and difficult because the AMF did not
know this regulation
Reporting to regulator for Eusef is « light » and in
line with expectations (and much lighter than AIFM
funds)
They are opened to discussions and willing to have
other EUSEF as we are the only one...
Relation with regulators
The label EuSEF is not known (because very few
funds) and after explanation many investors prefer
this regulation to « no regulation »
The foreigners were very happy that we could sell in
their country this product and that it was regulated,
They really like that the label insure our social
strategy and obliges impact measurement reporting
There P/E teams had difficulties to accept « self
regulated » funds but after long explanations they
validated this process.
Relation with investors
An investment in PhiTrust Partenaires is a risk, particularly in terms of liquidity, counterparty risk, market and foreign exchange risks as well as risksinherent to the solidarity nature of investments. For a thorough analysis of these risks and of the advantages and disadvantages of investing in PhiTrustPartenaires, the prospective investor is requested to consult the Memorandum of investment.
This documentation is provided for personal use only and is strictly confidential; it shall not be disclosed, published or reproduced, either in part or in full, by itsrecipient(s). The content of this document is provided for indicative and discussion purposes only. In no case does it constitute an offer for sale or subscription and shallnot be the only basis upon which an investment decision is made. Only the final documentation issued or signed, pertaining to a subscription, shall be authentic amongthe parties.Although the information contained in the documentation herein is obtained from sources deemed reliable by PhiTrust Partenaires, the latter does not provide anyexpress or implicit guarantee thereof, and shall not be liable for the exhaustiveness, reliability or accuracy of information contained herein.The onus is on each interested investor to first carry out his own analysis by also consulting, if necessary, his legal advisors in order to assess the suitability, with regardto his personal situation, of investing in PhiTrust Partenaires (hereinafter referred to as "the Company"). The attention of investors is drawn to the fact that the taxtreatment which shall be applied to his investment in the Company depends on his personal situation and this is subject to change. He is therefore recommended toconsult his tax advisor. Investment in the Company shall also be conditional upon the prior reading and understanding of the Articles of Association, the Prospectus andthe Company's Internal Rules and Regulations, which provide a detailed description of the rights and obligations of each investor and which are available upon simplerequest to the Head Office of PhiTrust Partenaires.Investment, if any, in the Company has in no case been advised by a French regulatory authority. Moreover, these authorities have neither checked nor confirmed theinformation contained in this information document.The attention of potential investors is particularly drawn to the risks inherent to this investment which are specified in the Memorandum of investment which you arestrongly advised to refer to.Past returns on similar investments provide no indication as to those that shall be generated from future investments that the Company shall undertake, since pastperformance does not guarantee future performance.Certain legal, tax or regulatory changes which may occur during the Company's life time, may, if applicable, have a negative impact on the return on this investment. TheCompany's shares cannot be freely sold and there is no structured secondary market. The Company's success will depend on the expertise and commitment of PhiTrustPartenaires' investment team, and in particular on its capacity to identify, select and acquire appropriate assets, as well as on changes in market conditions.There is no guarantee that the Company's objectives in terms of returns will be achieved or not. Therefore, each potential investor must form his own opinion on the risksinherent to this investment opportunity before deciding whether or not to invest in the Company.
Disclaimer
CONTACT
Olivier de [email protected]
Tel.: +33 1 55 35 07 58
www.phitrustpartenaires.com
PhiTrust Partenaires - 7 rue d'Anjou, 75008, Paris – Telephone: 01 55 35 07 55
Disclaimer : An investment in PhiTrust Partenaires is a risk, particularly in terms of liquidity, counterparty risk, market and foreign exchange risks as well as risks inherent to the
solidarity nature of investments. For a thorough analysis of these risks and of the advantages and disadvantages of investing in PhiTrust Partenaires, the prospective investor is
requested to consult the Memorandum of investment.
6. PANEL DISCUSSION & Q&A
Matteo MascoloEVPA
Giovanni Garcea
European CommissionOlivier de Guerre
PhiTrust
Roberto Randazzo
R&P Legal
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Don’t hesitate to contact Matteo Mascolo, should you have any follow-up
question related to this webinar and / or to EVPA’s activities!
This webinar is kindly supported by:
RUE ROYALE 94
B-1000 BRUSSELS
T +32 2 513 21 31
EVPA.EU.COM
european-venture-philanthropy-association
@_EVPA_
