Financial intermediaries

Conférence de mi-parcours
6 décembre 2013
Clermont-Ferrand, France
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Conférence de mi-parcours FIN-EN
Ingénierie financière:
Quelles améliorations pour l’avenir ?
6 décembre 2013 à Clermont-Ferrand
Les meilleures pratiques « Mise en œuvre »
identifiées par FIN-EN
Stefan Mathesius
Directeur Fonds remboursables & JEREMIE Andalousie
IDEA
Conférence de mi-parcours FIN-EN, le 6 décembre 2013 à Clermont-Ferrand, France
Clermont Ferrand, December 6th BEST PRACTICES FOR IMPLEMENTING STEFAN MATHESIUS
HEAD OF FINANCIAL INSTRUMENTS
AGENCY FOR INNOVATION AND DEVELOPMENT OF ANDALUSIA (IDEA)
Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 4 TWG 2: Framework “Implementa@on” Structural Funds Holding Fund Manager Financial Intermediary Regional Cofinancing Holding Fund Financial instrument Private Investors Final recipient Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 5 System configura@on: Financial Instrument, Financial Intermediary and Financial GAP Target Group (= GAP)
§  Sector/ Company stage/ Geographic scope
§  Size of target market /number of deals
expected
§  Severity of market failure
Efficiency Effec@veness consistency
consistency
Financial Engineering Instrument
§  Type of instrument (equity, loan, mezzanine,
guarantee)
§  Investment criteria and terms (size of FEI, deal
size etc.)
§  Government of the FEI (control and approval
process)
§  Reporting duties, control/verification
requirements, corrective measures
§  Retribution scheme
Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu Financial Intermediary
§  Structure and capillarity of intermediary
§  Capacity to generate dealflow according to
the target group/investment criteria
§  Compatibility with ordinary activity
§  Capacity to comply with reporting/ verification
requirements/ IT-System and processes
§  Risk of internal competition with existing
financial products. Opportunity costs /
cannibalization
6 Analyzed parameters Best practice criteria
Topics
•  Innovative design
•  Management fees
•  Co-financing actors
•  Leverage
•  Expenses for recipient
•  Implementation time
•  Investment process
•  Funds
•  HFM internal organization
•  Financial intermediaries
•  Communication
•  Closing and exit
•  Future
•  Effectiveness
Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 7 Findings: 2 Archetypes of Financial Engineering Instruments Effec@veness (doing the right things) goal
Risk capital funds Mezzanine instruments Combined instruments Risk sharing loan Microcredit Guarantee instruments Efficiency (doing things right) Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 8 Iden@fica@on of main drivers for effec@veness and efficiency • 
• 
Capacity to address gap
Capability to create desired impact
Effec@veness (doing the right things) • 
• 
• 
• 
• 
• 
• 
• 
Leverage
Remuneration scheme
Size of target group
Flexibility of intermediary
Experience
Learning curve
Qualified staff
Political endorsement
• 
• 
• 
• 
• 
Remuneration scheme
Investment process/ IT systems
Competitiveness between FI
Size of financial instrument
Bureaucratic burdens
Efficiency (doing things right) Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu • 
• 
• 
Time to market
Number of deals
Pace of disbursement
9 Cri@cal points for Effec@veness RemuneraUon schemes A sound design of the remuneraUon schemes must be always based on the strategy: goals, general approach, Uming, etc. Also, the design should be consistent with the rest of the design, must comply with the legal regulaUon (state aid) and must consider the whole life-­‐cycle of the FEIs (even a_er period of investments) Leverage A market failure in the supply side is intrinsic to the concept of financial market gap (e.g. investment is not interesUng for private money) In funcUon of the gravity of the market failure a high private leverage might become a constraint for the achievement of effecUve targeUng. On the other hand a high private co-­‐investment increases the impact for the addressed market segment. CriUcal Size of target group The target group of a FEI has to exceed a criUcal mass to manage a FEI effecUvely, otherwise the perimeter /
definiUon of the market segment should be adjusted (e.g. amplify geographical scope, amplify sector etc.) Flexibility of intermediary In funcUon of the severity of the market failure it is crucial that the intermediary has the capacity to adapt the investment criteria to the real needs. Commercial banks and guarantee insUtuUons are regulated and very limited in their degree of risk level assumpUon and consequently are not suitable to address effecUvely severe structural market gaps. Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 10 Cri@cal points for efficiency RemuneraUon schemes Management fees are a key success factor for the overall performance of FEI. CriUcal points: •  management fees should not cannibalize other financial products of the FI. •  The remuneraUon scheme should find a balance between success fees (to incenUvize quality) and fees that incenUvize the operaUonal performance (pace and volume). CompeUUveness between Financial intermediaries A financial engineering instrument can be managed by 1 or many financial intermediaries (in parUcular loan and guarantee instruments). The incorporaUon of compeUUveness between various intermediaries improves the efficiency of disbursement and ensures a high rate of execuUon of the FEI by end of the OP-­‐
period Size of the financial instrument A financial instrument needs a criUcal size to be run in a efficient way. The financial intermediary has to assume an important block of fixed cost that has to be paid from the management fees. However, the management fee is capped by EU-­‐regulaUon and by profitability criteria of the private investors (management fees reduces the yield of the financial instrument) Processes and IT-­‐
Systems Well working internal processes and automated interfaces to the holding fund manager/
management authority is crucial for the efficiency of a financial instrument, in particular in case of
intermediaries that deal with high volume of operations.
BureaucraUc burdens BureaucraUc burdens for both final beneficiary and financial intermediary may suppose an important obstacle for efficiency. In parUcular the exigencies for monitoring /control (separate accounUng, evidence of expenditures, evidence of achievement of objecUves) induced by the EU-­‐regulaUon may overcharge the exisUng procedures and business pracUce of intermediaries. Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 11 Thank you for your aQen@on Website: www.fin-­‐en.eu E-­‐mail: info@fin-­‐en.eu 12