Norway has still not implemented EuVECA – does it matter?
In the EU, both the AIFM Directive (AIFMD) and the EuVECA Regulation were introduced in July 2013. The regulation has been updated both in 2018 and 2019 and is becoming increasingly popular in Sweden. In Norway the Regulation is not yet implemented.
EuVECA managers are subject to significantly lighter regulations than a fully licensed AIF-Manager but still with market access across Europe. There is less reporting, a lighter application process for obtaining the EuVECA license than a full AIFM-licence and no fund depositary requirement. This allows for a lower cost base for EuVECA managers which is in line with EUs wish to promote the establishment and improve the possibility of further growth for small and medium size enterprises.
Where AIFMD regulates marketing within the EU to professional investors (MIFID definition), an EuVECA fund manager may market its fund across Europe to anyone who will state that they understand the risk of the investment and is willing to invest a minimum of EUR 100’. These investors may not meet the strict MIFID criteria of “professional investor” and an EuVECA license therefore opens a wider investor market.
Qualifying investments under EuVECA has been developed further since 2013. Quite large and established companies may be included in the 70 % of committed capital which must be invested in “qualifying investments”, this is not a “venture-only regulation”.
Clearly, the EuVECA criteria provides less investor protection than AIFMD. On the positive side however, the criteria are clear and straight forward. There are no difficult “re-classification-of-non-professional-investors” issues in EuVECA funds.
Permian has worked with EuVECA regulated funds and fund managers in Sweden for several years. From that base of experience, we are in a good position to answer the initial question in this article and our answer must be that it matters and that introducing EuVECA would be of benefit for many Norwegian fund managers. In our opinion, the most important reasons are that:
- EuVECA type funds tend to be smaller and EuVECA allows for a lower cost base.
- EuVECA 2019 update defines the term “pre-marketing” which is a much debated issue also in relation to AIFMD. This adds clarity.
- The investment universe is quite broad, many Norwegian funds would find that their investment mandate would fit well within the EuVECA requirements.
- While investor protection is weaker, there is some protection in a relatively high minimum commitment and the managers obligation to present the risks and act in a professional manner.
- Easy access to EU investors will be a benefit for the larger EuVECA investors, the smaller investors tend to have a more local investor base.
- The MIFID re-classification criteria which may allow non-professional investors to be treated as professional investors were not designed for investors interested in unlisted alternative investments.
- EuVECA provides clear criteria for investor onboarding avoiding the sometimes-difficult considerations which must be made under the MIFID re-classification criteria.
It should be noted that an EuVECA manager with AuM over and above the AIFMD thresholds of EUR 100 mill. (leveraged fund) and EUR 500 mill. (non-leveraged fund), would have to apply for an AIF manager license and follow the AIFM Directive.
Permian has written two previous articles about EuVECA, links below:
Permian will be happy to assist you in developing your marketing material or to support you in any way in the planning of your next alternative investment fund endeavour. We are also happy to assist you in other matters relating to fund administration and accounting.
For further information about our services in Norway and Sweden, please contact Marianne Normann (email@example.com), Ben Guren (firstname.lastname@example.org), Axel H. Daasvand (email@example.com), Rune Selmar (firstname.lastname@example.org), Ida Lindell Stefanik (email@example.com) or Anna Berntson (firstname.lastname@example.org)
AHD, Oslo, January 13, 2021