Hedge funds and Private Equity - PES

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80 Mortgaging the future to capture gains for personal enrichment in the present is quite an easy activity. The task for a good manager in a public company is to resist it! Managers have to balance the interests of today’s shareholders with tomorrow’s shareholders and all other stakeholders including the employees. As seen in so many of our case studies, the one party unrewarded is the employees. In many cases they suffer an erosion of job security and a loss of benefits. 2.13 The societies’ response – current national regulation The legal, tax and operating environment in which a private equity industry may develop is determined largely at national/local level. Local fiduciary relationships and obligations differ widely in the various Member States. Most Member States regulate part or all of the private equity value chain. The main areas of regulation cover Management of funds Placement to eligible investors Tax incentives and restrictions Funds and product terms and conditions Those in the industry who have developed specific products for retail consumers comply with a full range of different regulatory measures enforced by regulators with a strong mandate to protect retail investors. As mentioned, the LBO industry would like to see less regulation and restrictions. In the EVCA report 30 , one can see a list of criteria assessing the “friendliness” of the national environment for funds, managers, and investors. Among those criteria, the following are to be noted as they represent at the same time the points where possible regulatory changes would take place: no additional quantitative restrictions for pension funds to invest in private equity or venture capital on top of IORP directive 2003/41/EC requirements no geographical conditions for pension funds to invest outside EU countries no additional quantitative restrictions for insurance companies to invest in private equity or venture capital on top of Insurance Directive 2002/12/EC requirements no geographical conditions for insurance companies to invest outside EU countries existence of appropriate fund structure or investment vehicle to be used to invest in private equity and venture capital tax transparency31 for domestic and non-domestic investors non-domestic investors are exempted from having a permanent establishment in the country when investing exemption of VAT on management fees32 exemption of VAT on the carried interest33 no investment restrictions tax incentives to encourage investment in private equity and venture capital the nominal company tax rate is below the EU average (26.23% including any local and municipal taxes and/or other charges on income) there is a special tax rate for SMEs 30 European Private Equity and Venture Capital association and KPMG: “Benchmarking Tax and legal environments”, Dec 2006. 31 See Glossary 32 Idem 33 Idem
there are specific fiscal scheme for supporting the creation and growth of young and innovative companies there are fiscal incentives on R&D the income tax for private individuals is below the EU average (43.03%) the taxation of stock options is made “upon sale” and not when they are granted, vested or exercised. The country where all these conditions are met gets the best evaluation (1) and the worst get (3). The table on the next page gives an overview of the ranking of European countries according to the EVCA findings for 2006, in comparison with previous years. Overview of results Results tor 2006 Results for 2004 Results for 2003 Country Total Score Country Total Score Country Total Score Ireland 1.27 United Kingdom 1,25 United Kingdom 1.20 France 1.36 Luxembourg 1,49 Ireland 1.58 United Kingdom 1,4S Ireland 1,53 Luxembourg 1.67 Belgium 1.51 Greece 1.75 Netherlands 1.79 Spain 1.52 Netherlands 1.75 Italy 1,96 Greece 1.55 Portugal 1.81 Greece 1,96 Netherlands 1.62 Belgium 1.82 Total Average 2,03 Luxembourg 1.62 Hungary 1.88 Belgium 2,0S Portugal 1.71 Italy 1.86 France 2.09 Italy 1.72 France 1.89 Sweden 2,09 Austria 1.74 Switzerland 1.95 Spain 2.17 Denmark 1.75 Spain 1.96 Finland 2.25 Hungary 1,83 Total Average 1.97 Portugal 2.32 Switzerland 1.83 Norway 2.04 Denmark 2.S6 Total Average 1.84 Sweden 2.05 Germany 2.41 Finland 1.91 Czech Republic 2,12 Austria 2,53 Estonia 2.08 Poland 2.13 Norway 2.08 Finland 2.30 Sweden 2.12 Germany 2.37 Latvia 2.12 Austria 2.42 Germany 2.15 Denmark 2.46 Poland 2.16 Slovak Republic 2.49 Slovak Republic 2.17 Czech Republic 2.21 Slovenia 2.26 Romania 2.35 Source EVCA Part I – Hedge funds and private equity funds – how they work 81
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HEDGE FUNDS AND PRIVATE EQUITY A CR
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FOREWORD Since the 1980s the financ
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At the same time the PES Group took
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84.57 7 447.586 4789.4785 55 7845 4
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12 The need for long-term investmen
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14 1. Hedge funds and private equit
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16 In a very low interest-rate land
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18 The ECB has highlighted this cro
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20 in the sustainable development o
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22 Coherence, co-responsibility and
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24 Transparency in practise Some ar
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26 Ensuring more and better jobs An
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Page 32 and 33: 32 The first era of capitalism took
Page 34 and 35: 34 1. Hedge funds In the following
Page 36 and 37: 36 Hedge funds have a structure sim
Page 38 and 39: 38 Hedge funds have flourished in a
Page 40 and 41: 40 The European hedge fund industry
Page 42 and 43: 42 Institutional investors Current
Page 44 and 45: 44 - Funds of hedge funds (FOHFs) i
Page 46 and 47: 46 If we assume US mutual fund indu
Page 48 and 49: 48 the hedge funds themselves would
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Page 52 and 53: 52 These data notwithstanding, seve
Page 54 and 55: 54 1.11. Tendency of crowding Despi
Page 56 and 57: 56 Theory of money: “In modern ec
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Page 60 and 61: 60 Considering single strategy prod
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Page 68 and 69: 68 What could you do with 72 billio
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Page 72 and 73: 72 The figures provide a substantia
Page 74 and 75: 74 2.8 When targeting a company Whe
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Page 82 and 83: 82 Main conclusions: The total Euro
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Page 86 and 87: 86 Article 49 Within the framework
Page 88 and 89: 88 The purpose of this Directive is
Page 90 and 91: 90 As far as the hedge fund and Pri
Page 92 and 93: 92 The following are regarded as se
Page 94 and 95: 94 3. A Member State may entrust ma
Page 96 and 97: 96 Article 93 The Council shall, ac
Page 98 and 99: 98 Primarily, however, society must
Page 101 and 102: Social Europe versus capital market
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Page 105 and 106: as a rule without any influence fro
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Page 113 and 114: usiness plan for Kion to employee r
Page 115 and 116: The combination of increased indebt
Page 117 and 118: The EU has in the past tried to com
Page 119 and 120: 3.1 The attractiveness of public ut
Page 121 and 122: fulfilment of public service respon
Page 123 and 124: The importance of Europe’s transi
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Page 129 and 130: contractual issues e.g. Lock-in per
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As many jurisdictions require benef
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Expert Group claims - with striking
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The rising number of hedge funds ap
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time peak in 2005.” It is importa
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Box 2: The Amaranth case (2006) In
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gies, size and age. For instance, i
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Box 3: Complex leverage arrangement
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force a hedge fund to default on it
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Private equity - especially in the
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finance infrastructure through long
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84.57 7 447.586 4789.4785 55 7845 4
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154 But if we in Europe - and hopef
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156 2. Market transparency - a comm
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158 Considering the fact that a lar
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160 Furthermore investment banks ar
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162 3.3 Transparency and supervisio
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164 Recently in most European count
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166 The European Commission should
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168 The EC should also create a fra
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170 4. Private Equity Funds - focus
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172 to create incentives for longer
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174 policy are not being met. This
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176 Acquisitions by private equity
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178 5. Our immediate proposals In t
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180 rules on the disclosure of tota
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182 have rules here and we should p
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AA 1. Company description The Autom
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Autoteile Unger 1. Company descript
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Bulgarian Telecommunications Compan
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Deutsche Börse 1. Company descript
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DIS 1. Company description The DIS
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DT-Group 1. Company description DT
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share alternative. At that time the
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Frans Bonhomme 1. Company descripti
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Friedrich Grohe AG 1. Company descr
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their relations with TPG and CSFB a
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Gate Gourmet 1. Company description
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ISS Denmark 1. Company description
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2.2 Debt structure, alteration of c
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References Süddeutsche Zeitung 09.
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2.3 Management policies and shareho
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would have unlocked hidden reserves
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Peguform 1. Company description The
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Picard 1. Company description Picar
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Stork 1. Company description The in
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special members of the board of com
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EUR 5.1 billion private equity fund
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Telecom Italia Group 1. Company des
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2.3 Management policies and shareho
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from the tourism business, which is
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The consequences for jobs in Hambur
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2.4 Corporate governance and econom
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84.57 7 447.586 4789.4785 55 7845 4
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244 Bond A debt investment with whi
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246 Investment vehicle This term is
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248 of a security borrowed by the s
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