The proposed project is an investment in Euroventures Hungary III L.P. (the Fund), a Hungary-focused private equity fund. The Fund will invest in medium-sized companies in the buy-out, expansion or development stage with the objective of achieving long-term capital growth. The EBRD investment will be made alongside Hungarian pension funds through a specially designed investment vehicle. This vehicle will permit these pension funds to invest in Euroventures Hungary III, providing them with access to private equity investment for the first time.
The project is expected to assist the transition process in several ways.
First, it will increase amount of active equity available to companies in the €2-5 million investment range. Currently demand for equity greatly exceeds supply. Through the active participation of the fund manager, these companies should expand their operations and improve their corporate governance.
Second, the Fund represents a successor fund of the Euroventures Hungary BV fund. By utilising a fund manager with a credible track record, the investment would contribute to the sustainable development of the private equity sector in Hungary
Finally, using the specially designed investment vehicle, the Hungarian pension funds will be able to invest in the private equity market in Hungary and the region. Within a suitably diversified portfolio, private equity is an important asset class for retirement schemes. Investing in alternative asset classes such as private equity should contribute to the development of more sophisticated investment policies and practices of the Hungarian employees' pension funds.
Euroventures Capital Advisory Kft will be the investment advisor. This company is also the advisor for the existing Euroventures Danube fund in which EBRD is also an investor, Euroventures Hungary III L.P. and the investment vehicle should be incorporated in Guernsey with a fund management company, EV Capital Partners, as the general partner.
The end clients will be medium-sized companies in Hungary.
The EBRD's maximum commitment would be €15 million, to constitute 20 per cent of total fund capital.
The Fund has a total target size of €75 million.
The Fund will carry out its operations in accordance with EBRD's Environmental Procedures for Private Equity Funds. In implementing these procedures, the Fund will require its borrowers to comply, at a minimum, with national/local health, safety, environmental and public consultation requirements.
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