Depository rule irks VC industry

A proposed pan-EU marketing regime for venture capital funds may come with an unwanted depository requirement following a committee vote from the European Parliament.

In a response statement the European Private Equity and Venture Capital Association (EVCA) called the vote “disappointing”, arguing that the financial costs of depositaries – used by GPs to safekeep investors’ assets – would make it impossible for smaller venture capital fund managers to enter the voluntary regime.

EVCA secretary general, Dörte Höppner, said the continent was at risk of missing an opportunity to “boost SME financing and growth, an area in which Europe is so desperately running behind the curve”, adding there was still time to amend the regulation before the scheme’s implementation by July 2013.

A related point made by the industry was that the Alternative Investment Fund Mangers Directive (AIFMD), a regulation designed for private equity and hedge funds operating in the EU, exempts GPs managing less than €500 million from the depositary requirements.

EU policymakers’ decision to draft a bespoke venture capital regime rested on the idea that AIFMD was not suitable for venture capital. Consequently,” it does not make any sense” to reintroduce certain provisions of the  Directive – such as the depositary requirement – to the venture capital scheme, argued EVCA.