How to fix European SME capital markets -
Sweden has hit the headlines in a big way this year. Many say it has shown the rest of Europe how to react to a crisis and, although it has come in for some flak as second-
Whether or not the country deserves high regard for Tegnell's cool-
At 130%, Sweden's market capitalisation to GDP ratio is the highest in Europe. Does that help anyone other than investment banks? The report says yes.
"An important policy question is what this means for the democratisation of wealth creation and retail participation in stock markets, and what is the impact on the real economy? As companies, especially ones in high-
Of course, the man-
Thriving stock markets may also have an impact on entrepreneurial culture. Spotify, Europe's most successful internet stock, came from Stockholm, and a recent article in the UK's Daily Telegraph talks of Sweden "threatening to eclipse the UK as technology capital of Europe". In 2019, British start-
What the article does cite as a driver, among other things, are the tax reforms of the 80s and, in particular, the lack of any form of wealth tax. Also, a local serial entrepreneur told me that a major factor in the development of the country's equity culture had been tax incentives for investment included in those same reforms, which spawned a thriving asset management industry. So much so that foreign ownership of Swedish SME's tends to be a good deal lower than similar companies in Germany, where a nascent equity culture emerged in tatters from the Neuer Markt implosion in the early noughties.
The Oxera report also mentions Swedish Tax incentives, referring to a further round in the 90s. It reinforces the argument in favour by extolling the success of PIR tax incentives introduced in 2017 in Italy, which, is one of only 4-
Not surprising then, that one of the top 3 policy recommendations for the report's first recommended development path is "Use tax incentives". Also in the top three is giving investment managers dedicated SME money from the EIF to run, which we fully concur with, as the creation of an ecosystem of qualified, long-
An important caveat is the liquidity conundrum of how to avoid creating a vast array of mutual funds holding illiquid assets which, in inevitable market downturns, run into problems when mass redemptions hit. ELTIFs, private-
The author doesn't know enough about EU law to understand whether tax incentives can be centrally mandated, and it would appear that, thus far, ELTIFs have run aground due to a lack of clarity regarding local tax treatment. That said, where there's a will there's a way, and one would hope that commissioning the Oxera report (hot on the heels of a similar, if less extensive one by the IPO Taskforce) is a manifestation of such a will.
Alternatively, we could just hand over the reins to the Swedes for a couple of years!
Max Casini, ACTiO, London, November 2020