Key Ingredients for an Efficient and Effective Public-Private Equity Fund

Abstract

The synergic interactions between private equity activities and public intervention are becoming an increasingly important subject of attention in all European countries and may represent one of the main drivers for a new economic policy, based on the use of market instruments for general economic and social purposes, with very limited use of public debt and mainly based on private capital funding. In an economic context such as the European one, characterized by an excessive level of public debt and by the mandatory need to reduce it, the intervention tools combining public interest and the use of private capital may prove to be extremely effective and advantageous and, if well put into effect and accurately used, may represent a new and important frontier for the industrial policies aimed at supporting European companies’ development and growth, with special regard to small and medium-sized enterprises (SMEs). However, in the context of the initiatives aimed at stimulating investments involving public and private resources, it is of fundamental importance to understand exactly and correctly the main characteristics of the industry in which to operate in partnership and what are the economic and social impacts of the activity object of intervention. This will certainly help to address the interventions in the best possible way, making them consistent with the institutional economic policy objective and avoiding crowding-out effects, as it may happen when the increased public sector spending replaces, instead of stimulating, the private sector investment. In the case of public initiatives, which involve the private equity industry taken into consideration in this chapter, it is of fundamental importance to understand the characteristics and dynamics of this sector in order to optimize the specific tools used by public authorities in their actions.