The EVCA is regularly in contact with our counterparts associations in the US. These relationships are more and more important as regulators increasingly look to draft global financial rules. A few months ago we were working with the Private Equity Growth Capital Council and the National Venture Capital Council to agree a joint position on long-term investment.
The Organisation for Economic Co-operation and Development (OECD) had asked for our input and expertise as they prepared their Principles for Long-Term Investment.
The Principles have now been published and it’s encouraging that the OECD took many of our comments on-board. We’re looking forward to continuing this good work with our American colleagues in the future, on this issue and on others.
There’s a similar debate about long-term investment in Europe and the EVCA has been talking to the European Commission about how to encourage, or at least not discourage, it.
But why all the fuss about long-term investment in the first place?
The global economy needs investors who are patient, committed and can provide the capital that companies need to grow and develop or can finance the infrastructure projects that both emerging and developed markets need for their continued growth. When private equity is involved, it can also transform businesses into world-class companies, contributing to Europe’s economic growth.
Private equity funds are long-term investment vehicles and deserve a different regulatory treatment to more liquid assets, which change hands much more quickly and can be more risky.
Investors such as pension funds and insurers put their capital into a fund for about 10 years. During that time private equity managers invest the capital into a wide portfolio of companies (watch our video How private equity works).
Each company is built into a better business over the medium to long-term before being “exited”, earning returns for the investors and allowing the company to move onto its next stage of development. These returns help, for example, pension funds to meet their liabilities and pay for all of our pensions. It’s a perfect match which you can read more about here.
If you want to learn more about long-term investing, please look at this blog or our Briefing Long-term investing: The route to sustained growth .