The European Commission has launched a Green Paper on long-term investing, beginning a debate about the best ways to encourage more long-term investment in Europe.
The EVCA, and other associations, welcomed the chance to contribute to this important discussion because more long-term investment can help the European economy recover.
EVCA Secretary-General Dörte Höppner said: “Pension funds and insurers need access to private equity funds to help meet future liabilities. The economy, and the companies that drive it, need the patient capital that long-term investors can provide via private equity and venture capital firms.”
Unfortunately, much of current regulation can discourage investors from allocating capital to long-term investments.
And accounting standards to measure risk in long-term asset classes can create artificial volatility in asset classes, such as private equity, that are meant to be held by investors until maturity.
Check out the EVCA press release about the Green Paper, which goes into more detail and praises the attention the Paper gives to venture capital. You can also read the EVCA Briefing: Long-term investing: The route to sustained growth and blog: A long-term investment that transforms companies to find out more.
Other associations and organisations echoed our concerns about investors being discouraged from allocating capital to long-term ventures.
Insurers are concerned that capital requirements and balance sheet volatility in the forthcoming Solvency II regulation do not make it more expensive for insurers to invest in long-term assets.
President of Insurance Europe, Sergio Balbinot said: “In the wave of regulatory reforms currently facing the European insurance industry, it is therefore vital that any changes do not jeopardise insurers’ ability to provide this much-needed long-term financing and stability to the economy. Europe’s renewed economic growth depends on it.”
Jürgen R. Thumann, President of BUSINESSEUROPE, agreed. “Europe needs a regulatory framework that is much more supportive of both the development and financing of long-term investment projects in areas such as energy, innovation and infrastructure,” he said.
Joanne Segars is Chair of PensionsEurope and, like the EVCA, is concerned that proposed revisions to the IORP Directive could lead to Solvency II style regulation being applied to workplace pensions. That would mean less capital being allocating to long-term ventures.
She said: “We are particularly encouraged by the explicit recognition [in the Green Paper] that the new EU pensions directive should not discourage sustainable long-term financing.”
You can read about the EVCA’s campaign for a different approach to workplace pension supervision here.
The EVCA will respond to the Green Paper in more detail in the coming weeks.