EIF denies UK investment shutdown

Market sources claim the fund had stopped new investments into vehicles focused on the country while Brexit negotiations are underway

The European Investment Fund has denied halting investments into UK-focused private equity funds in the wake of the EU referendum.

Market sources familiar with the matter told Private Equity International the EIF had ceased investments to UK funds until the outcome of Brexit negotiations was clear. This potential shortfall would leave a “reasonably sized hole” in the UK private equity market, according to one source.

Earlier this week, The Times reported venture capital funds had also been told the EIF had effectively stopped new British investments.

However, a European Investment Bank spokesman said there was no moratorium on investments into UK funds. Instead “due diligence on them now needs to be more thorough, and take into account a wider range of factors”, the spokesman said.

He pointed to a £20 million commitment ($25.7 million; €22 million) for WestBridge II, a lower mid-market vehicle targeting UK investments in May. The EIF also committed £50 million to the £100 million Scottish-European Co-investment Fund in June, according to a statement. It is unclear whether any other commitments have been made this year.

Earlier this year, the British Business Bank’s VC Catalyst scheme received a £400 million funding rise from the government, which some have interpreted as a possible attempt to fill the gap resulting from any investment slow down post-Brexit. The funding boosted investments available for venture and growth capital funds, as well as increasing the amounts BBB can commit to individual funds.

The EIF, an agency specialising in funding for small and medium-sized enterprises, has become an important investor in UK venture capital and growth equity funds. Last year, the fund signed €404.9 million worth of UK equity deals, according to its 2016 annual report. Key commitments included €60 million to Growth Capital Partners IV, which held a final close on €205 million in July 2017, and €83.3 million to the €459 million CBPE Capital Fund IX, which closed in August 2016.

In June 2016, the EIB said there would be no imminent changes to the bank’s relationship with the UK. “At present the UK’s shareholding in the EIB remains and the EIB’s engagement in the UK is unchanged. Any change to the EIB’s shareholder structure or lending activity is a decision for the member states,” the EIB stated.