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European venture capital “needs pension funds”

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BELGIUM – Pension funds have been identified as one of the factors that could help in the development of the European private equity industry.

The European Venture Capital Association said that it has identified 10 indicators – of which five are tax related - which can contribute to “shaping” a favourable environment for private equity.

Pension funds were one of the non-taxation factors, alongside fund structures, better merger regulation and an “entrepreneurial environment”.

The call comes as information from KPMG Corporate Finance reveals that there was just one listing of a trading company in Europe in the first quarter, Meta SpA in Italy, which raised 67 million dollars. The UK, KPMG said, saw no initial public offering by a trading company at all in the quarter.

“The fragmentation of tax and legal environments in the European union hamper the development of a truly entrepreneurial environment and therefore require urgent attention,” EVCA said in a statement.

The body has launched a long-term initiative to identify where tax and legal measures can be improved to develop a “truly European” private equity and venture capital environment. It has presented a new paper, “European Private Equity and Venture Capital: Benchmarking European Tax and Legal Environments” as a benchmarking tool to enable European countries to be compared.

"The purpose of the report is to promote convergence and not disparity," said EVCA chairman Max Burger-Calderon.

The study found that the UK and Ireland have the most favourable regulatory environment for private equity and venture capital. Next were Luxembourg, the Netherlands, Italy and Greece.

Slightly worse than average were France, Sweden and Belgium. Spain, Finland, Portugal and Germany were towards the bottom of EVCA’s scale.

And it found that Denmark and Austria “provide the least favourable tax and legal environment for private equity and venture capital”.

"The study should therefore not be narrowed down to the 'ranking' of countries," said Didier Guennoc, EVCA research and public affairs director.

Elsewhere, asset manager J P Morgan Fleming found in a survey that 44% of the largest 350 UK pension schemes now invest in private equity, with the overriding reason for investing being the potential for higher returns compared with conventional asset classes.

But the proportion of total pension fund assets invested in the asset class was an average of 4.4% of pension fund assets. The survey canvassed 171 of the top 350 pension funds in the UK representing 364 billion pounds (528 million euros) of pension fund assets.

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