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Selling private equity funds

Raising a European private equity fund is hard enough. But navigating the myriad rules that restrict fund promotion adds unnecessary pain to the process, according to SJ Berwin.

It is inevitable that European lawmakers want to protect investors from asset classes with which they may be unfamiliar, or for which they may not be suited, but the differences across Europe are striking, and the need for harmonisation is clear.

The European Private Equity and Venture Capital Association (EVCA) has just published a 136 page guide to the "Legal and Regulatory Aspects of Marketing and Promoting Private Equity Funds Across Europe". This comprehensive paper covers the rules that apply to the promotion of funds in 14 European countries and in the United States, and it highlights the significant differences that exist between countries. Much depends on the structure that is used (rather than the underlying nature of the investments that are being sold), and the rules on marketing to high net worth individuals are particularly difficult to deal with.

There are moves in some European countries - including, for instance, the United Kingdom - to liberalise the rules on marketing to high-net worth and sophisticated investors, and there are indications of tentative moves towards a self-certification regime similar to that which already operates - apparently satisfactorily - in the United States. These moves are to be welcomed and encouraged, since they would make the existing (cumbersome) rules much easier to operate in practice.

But despite that limited progress, and even though there is already some pan-European legislation on the subject, there is a very long way to go before rules on promotion are coherent and consistent across Europe. In the meantime, those rules are another bureaucratic hurdle for fund managers to leap.

SJ Berwin is a pan-European law firm with a particular focus on private equity. It has offices in London, Frankfurt, Munich, Berlin, Madrid, Paris and Brussels. If you would like further information on our services to the private equity industry please contact Jonathan Blake or Simon Witney in our London office 020 7533 2222 or visit our website at www.sjberwin.com