EuSEF are expected to be run predominantly by smaller asset managers which we define as those with less than €500 million in assets under management. Managers with assets below this level do not need to be authorised under the Alternative Investment Fund Managers Directive or AIFMD, provided they manage unleveraged funds that do not offer redemption rights during the five years following the initial investment. However, managers with less than €500 million of assets under management do not receive the 'passport' to sell their funds across borders in the Union which AIFMD authorisation gives unless they offer EuSEF funds or their sister European Venture Capital (EuVECA) funds.
Managers offering EuSEF and EuVECA do not have to comply with the full range of AIFMD rules on the basis that the funds they offer are targeted at specific types of investors and unlike other alternative investment funds, are subject to a set of product rules. As a result they are able to market their funds to eligible investors in all Member States.
Some asset managers who are already subject to the AIFMD have said they want to offer EuSEF and EuVECA. We are looking at ways to make this possible.
The returns offered by EuSEF are not the same as other types of collective investment funds which aim to provide purely financial returns. Here the returns are social as well as financial and the funds will invest in companies that cannot be easily bought and sold. Investors therefore need to be comfortable with and able to commit their capital for a number of years.
Given this, there is a need to ensure that small and/or unsophisticated investors who may not understand or cannot afford to accept this different type of risk and return do not invest in these funds. To do this there is a high minimum investment amount of €100,000 in place for EuSEF and for EuVECA. This makes it clear that these funds are only suitable for professional investors who can afford to take the risk they bring with them.
Some managers interested in offering EuSEF are concerned that this threshold is too high and they have asked the Commission to look at whether it should be reduced. We are considering this at the moment.
