Investing responsibly

Solvency II

The upcoming review should tackle the current misalignment between the true risk of investing in private equity funds and the risk weight applied. Regulation should not disincentivise insurers’ investments in private equity.

IORP

Pension funds seeking to grow the pension pots of citizens saving for retirement provide about a third of all capital invested into European private equity. Therefore, it is critical to avoid imposing any new quantitative capital requirements in the Institutions for Occupational Retirement Provision (IORP) Directive that would discourage their investments.

ELTIF

The review of the European Long-Term Investment Fund (ELTIF) Regulation provides an opportunity to assess the uptake of the regime and to consider steps that would further enhance ELTIF’s proposition.

Sustainable finance

Private equity’s active stewardship and long-term investment model mean many private equity fund managers already have a strong focus on environmental, social and governance (ESG) consideration. As the EU continues to show leadership on sustainable finance, any new rules need to be workable, proportionate and support Europe’s wider economic aims.

Sophisticated investors

Part of the capital raised by private equity comes from high-net-worth individuals, often former entrepreneurs, or other private investors who do not meet the strict, trading-orientated professional investor criteria defined in the Markets in Financial Instruments Directive (MiFID). Recognising the value and sophistication of these semi-professional investors and setting them apart from retail investors beyond the EuVECA regime – for example, by exempting them from the Key Information Document (KID) requirements – will ensure they commit more capital to growing companies through private equity.