A momentous step towards better private markets

On March 19th, the European Commission published its Communication on the Savings & Investments Union. This important document for the first time highlights the initiatives the European Union plans to take in the coming months and years to develop its financial markets. 

Invest Europe fully supports the high level of ambition set out in the document and the recognition of the central role of private equity, venture capital and infrastructure in financing Europe’s future. 

Actions to improve fundraising and exits 

It is to the Commission’s credit that the Communication largely focuses on the effective problems faced by managers and investors alike, following the many recommendations made by Invest Europe in the past few years. 

Barriers to investments in private equity have been well identified, in particular when it comes to insurers (Solvency II) and pension funds (IORP). As identified by Invest Europe in Forward – our policy agenda - a year ago, removing these prudential barriers is crucial to unlocking billions of additional capital to EU businesses through institutional investments in long-term funds. The same is true of the development of long-term saving products which must be designed to allow EU citizens to invest in productive assets. 

The Communication rightly highlights the role of banks in the financing ecosystem. While changes to securitisation can indeed help boost investments, it is disappointing that there is still not sufficient ambition to make banks better long-term equity investors. Changes to CRR in that respect would have a much better potential to ensure that a small part of the banks’ capital powers EU start-ups and scale-ups, as we flagged in our Savings and Investments Union paper. 

An agenda that acknowledges the real issues faced by managers

Measures to improve the implementation of AIFMD and to remove remaining barriers to distribution – including unhelpful rules on pre-marketing and denotification - will be essential to the whole private equity ecosystem, while a widening of the scope of the EuVECA passport would especially be welcomed by venture capital and growth managers operating cross-border. Invest Europe has been in constant conversations with Commission services to ensure that the right issues that prevent managers to operate cross-border funds are identified. 

Initiatives to improve exit opportunities, whether IPOs or trade sales, also have the potential to make it easier for managers to find the right opportunities for the businesses they have bought. Finally, Invest Europe welcomes the commitment to have sufficient public funding to support burgeoning venture capital ecosystems. 

With the agenda set in this Communication, the European Union gives itself the chance to truly support private markets. Now it is time to transform these laudable ideas into powerful changes.