‘Best practices’ guide aims to boost Spanish LP capital in private equity

Spain's private equity and venture capital association wants to make it easier for the country's institutional investors to access the asset class with its first guidance publication.

Spain’s private equity and venture capital industry body wants to make it easier for the country’s institutional investors to invest in the asset classes by publishing its first best practices guide.

The Asociación Española de Capital, Crecimiento e Inversión, which represents 190 members including around 110 PE and VC firms as well as 10 institutional investors, released its Best Practices Guide for Private Equity and Venture Capital Funds on Tuesday.

The guide is available in Spanish and English and covers areas including management fees, fund terms, co-investment rights, GP-LP alignment and environmental, social and governance issues.

“We believe that alignment of interest is at the core of our industry, something I believe we are particularly good at,” ASCRI chairman Miguel Zurita told Private Equity International. “We believe this is a tool to help in that alignment of interest.”

Clarifying areas such as end-of-life issues should help make a better environment in which to petition the government to relax restrictions on institutional investor – especially pension fund – capital into private equity, said Zurita, who is also co-chief investment officer at investment firm Altamar Capital Partners.

“Some people have [questions such as] what do I do at the end of the life of a fund, how do I liquidate, do I liquidate or not, do I have any rights?” he said. “We want to make sure that does not happen. When you’re getting married you’re not thinking about a divorce, but in this case we think it’s very healthy that people reflect on all the different things that could happen.”

Spanish institutional investors accounted for around 40 percent of of the roughly €1.9 billion committed to local private equity and venture capital vehicles last year, according to data from ASCRI.

Other industry bodies such as the Institutional Limited Partners Association have published guidelines alignment. ILPA is set to publish an update to its private equity principles that includes guidance on end-of-life issues and fund restructurings, as Private Equity International reported in September.

The ASCRI guidance, which does not specifically mention fund restructurings, recommends that material modifications to fund documents “shall be approved by a majority of the investors” and that “enhanced majorities” may be necessary in cases of substantial modifications.

The association has petitioned the Spanish government with a list of eight proposals including increasing the asset allocation of pension funds and employments plans to private capital by improving the tax regime, standardising the carry tax regime in line with France and the UK, and modifying the Fondo de Capital Riesgo model to make it similar to the SIF or SICAR in Luxembourg or the traditional limited partnership structure.

“Historically, as an industry, we’ve probably kept a low profile, but we’re becoming material in the economy,” Zurita said. “We have several thousand companies owned by private equity houses which provide close to half a million jobs in the country. We are relevant for the economy.”