The European Investment Fund (EIF) has secured its first third-party mandate, awarded by the German Federal Ministry of Economics and Labour (BMWA). Funds for the E500m facility will be provided on a 50/50 basis by BMWA and EIF.
The facility is designed to support the establishment and financing of VC funds making investments in early, development and mid-stage technology companies in Germany. The declared aim is to establish a diversified portfolio of commercially viable VC fund investments – and matching financial return expectations typical for the sector.
This BMWA agreement is the first mandate that EIF will manage on behalf of a third party. Currently, EIF operates five venture capital mandates from both of its capital providers: the European Investment Bank and the European Commission.
The facility will have an investment period of up to five years and a divestment period of up to ten years. Investments made under the facility will be matched by EIF on the basis of a co-investment agreement; the overall amount available for investments will be up to E500m. In a statement, the EIF said that the new capital would result in an estimated E1.7bn of additional investments for the support of innovative companies through venture capital funds.
Investments will be split between seed and early stage funds focused on technology transfer (funds that have access to or co-operate closely with major public and private research centres) and funds that target follow-on financings for tech companies in their early, development and mid-stages.
The EIF hopes investment in European research will reach three per cent of GDP by 2010. The EIF has already committed E2.5bn to 184 VC funds across the EU and the acceding countries. In Germany, the fund has committed E315m to 22 VC funds, each time as a cornerstone investor.
“For the first time, EIF has received an investment mandate from a third party other than the EIB or the Commission,” said Francis Carpenter, chief executive of the EIF. “This is a natural extension of EIF’s present mandates and I hope we can strike other mandates with public or private investors in other countries.”