Pośrednicy finansowi jako klucz do udanego wdrożenia Instrumentu Finansowego (doświadczenia szkockie) Pat McHugh, Dyrektor Inwestycyjny w Szkockim Banku Inwestycyjnym (Wielka Brytania) Financial intermediaries as a key to successful implementation of financial instruments - Scottish experience Mr Pat McHugh, Investment Director at the Scottish Investment Bank Przedsiębiorczość
Financial Intermediaries as a key to successful implementation of Pat McHugh SME Holding Fund Directorate for Economic Growth Scottish Government (on secondment from the Scottish Investment Bank) financial instruments the Scottish experience
How to select a fund manager the Scottish experience Pat McHugh SME Holding Fund Directorate for Economic Growth Scottish Government
Selecting a fund manager 5 steps: 1. Identify the problems 2. Identify appropriate financial instruments 3. Decide whether State aid necessary 4. Select Fund Manager via full procurement process 5. Contract, then monitor progress portfolio management Due diligence is Key
Identify the problems, formulate solutions Ex ante assessment of financial instruments: - quantifies scale and nature of gaps (micro credit, debt, mezzanine, equity, guarantees) - recommends type and size of FIs most suitable to address gaps - Recommends delivery methodology, eg, FoFs, direct, coinvestment, etc - Recommends State aid, if appropriate Do it yourself or contract with a suitable expert, eg, EIB Group.
Selecting a Fund manager - a) procurement procedures Open unlimited number of interested parties tender against defined parameters. Can attract unwieldy unwieldy numbers of bidders; Restricted 2 stage procedure, PQQ and ITT stages. PQQ stage: set minimum criteria relating to technical, economic and financial capabilities. Evaluate then shortlist to ITT stage; ITT stage: detailed evaluation on quality/added value; score on preagreed criteria; possible interview to clarify information in tender; Accelerated Restricted only used for reasons of urgency: must demonstrate reasons. Consider appointing external expert to manage the process.
Selecting a Fund Manager - b) track record Assessment of track record (in delivering similar FIs): - Relevance - Attribution to the team - Exits achieved to date - Analysis of current portfolio - Ability to build value - Compare with similar
Selecting a fund manager - c) the team assessment of bidder s team: - CVs of principal team members - Complimentary skillsets - Stability and succession - Reputation
Selecting a fund manager - d) the proposition assessment of bidder s proposition: - Is it credible and will it meet your targets? - Robustness and credibility of deal sourcing, transacting, portfolio management; - Operational and financial capacity; - Level of management costs and fees; - Compatibility of investment strategies, eg, syndication, follow on, use of NXDs, etc. - Alignment of interests.
Due Diligence is Key Screening: assess basic proposition, then physical meeting; Detailed appraisal of tender; Interview; Alignment of public and private sector interests: Balance commercial v economic; fee structure; 10 year LP v 8 year ESIF; Conclude legal documentation, including contractual safeguards to provide performance controls; Monitor progress, take corrective action.
The Scottish approach 2016-2022 Ex ante assessment February 2015: Address gaps in provision of microfinance, debt, equity to SMEs; Grow Scotland s informal investment market Ex ante solutions financed by 2014-2020 ESIF Programme; Create SME Holding Fund (FoFs): Fund managed by Scottish Government specialist staff Secure fund managers via restricted procedure open to public and private sectors; Part finance national funds with critical mass; All funds follow Market Economy Operator test; Returns re-invested in similar Scottish funds.
Thank you. Questions? Pat McHugh Pat.mchugh@scotland.gsi.gov.uk