Europe is increasingly feeling the political strain of a refugee crisis at a time when the continent has yet to recover fully from the financial crisis. The International Monetary Fund last month warned, according to news publication Telegraph, that the economic impact of this migration was uncertain.
The Telegraph quotes the organisation as stating that “international experience with economic immigrants suggests that migrants have lower employment rates and wages than natives, though these differences diminish over time. Slow integration reflects factors such as lack of language skills and transferable job qualifications, as well as barriers to job search”.
In light of this, it is particularly heartening that recently Global Government Venturing reported three major deals worth more than a combined $1.5bn that are set to boost a range of economies across Europe.
In Germany, government-owned bank KfW has joined forces with the European Investment Fund to provide domestic small and medium-sized enterprises with $546m over the next two years. The money is specifically aimed at businesses previously funded through the European Fund for Strategic Investments, an initiative that has already leveraged approximately €50bn ($55bn) across the continent.
Not to be outdone, Muzinich & Co, an asset manager with offices across the UK, Europe and the US, has sparked the interest of several UK pension funds and British Business Bank Investments, the venture capital arm of UK government-owned British Business Bank. Muzinich is hoping to raise $500m for its vehicle, dubbed UK Private Debt Fund.
The move by four UK pension funds, including the Greater Manchester Pension Fund, follows a recent shift in Australia where the local equivalent, superannuation funds, have also begun increasing venture capital efforts. Pension schemes from other countries, such as Canada’s Omers, have been appearing in GGV stories for a while, and it will be interesting to see if this trend continues into other geographies.
Kieran Quinn, chairman of the Greater Manchester Pension Fund, said: “Pension funds have traditionally acquired exposure to fixed interest through traded corporate bond funds. In the current market, private debt funds offer attractive target returns, and the closed-ended structure reduces market risk. But of course, in private debt, strong bottom-up credit analysis is essential, and this is an area in which we expect Muzinich to deliver.”
It is Kuwait’s interest in French startups, however, that is particularly telling in light of another Asian state turning towards the old continent for investments. Indeed, Singapore’s sovereign wealth fund Temasek has set up a European Advisory Panel to identify opportunities in the market, as GGV reported yesterday.
Kuwait’s government will work with BPIfrance, the French government’s investment bank, to back venture capital funds. Kuwait has not yet disclosed what entities are representing the country in the deal or whether its sovereign wealth fund, Kuwait Investment Authority, is involved.
The two partners have launched a first fund, aimed at the IT sector, worth between €200m and €250m – more than half the total amount of committed capital. Kuwait is injecting €100m while BPIfrance is investing €50m and the remaining money will be secured from institutions and companies in both countries. Overall, Kuwaiti financial institutions are providing two-thirds of the money, while BPIfrance has committed the other €150m.
It remains to be seen whether the collapse of the Safe Harbour agreement – the framework that enabled US companies to transfer data on European customers to servers on US soil within European data regulations – will provide an opportunity for growth for IT companies in Europe. The deal was declared invalid by the European Court of Justice in October last year and the deadline has passed without a new agreement, potentially making it a costly endeavour to all but the larger corporations to target European consumers.
Either way, it seems clear that there is a strong belief in the sector’s potential, and with 2016 only two months old, there may yet be quite a few more government-backed funds heading this way.