1、tes of obsolescence. This report considers whether these characteristics raise different or additional financing problems for TBSFs, for example because of the difficulties potential finance providers may face in assessing the technology, or because of uncertainties and risks over the likely costs o
2、f R some institutions have said they are looking for more sustained strong performance before they commit a significantly greater proportion of their portfolios to private equity. A range of other factors have also been mentioned. Although views differ on their relative importance, they include: the
3、 influence of benchmarking; the longer-term contracts implied by start-up/early stage investments; the high research costs in selecting between venture capital funds to achieve necessary diversification or to manage a portfolio of assets that includes a commitment to venture capital; and regulatory
4、or fiscal factors. On this last point, the Minimum Funding 2 Requirement, for example, may be encouraging UK pension funds to focus investments more on assets used as benchmarks in the valuation of liabilities for solvency purposes (quoted equities and gilts), and may also be inducing companies to s
5、witch from defined benefit to defined contribution pension schemes; both could be adverse for holdings of unquoted equities such as venture capital. Restrictions on investments through limited partnerships and the high fixed costs of due diligence, which make investment management more expensive per
6、 unit of funds invested for TBSFs, have also been cited as factors. The regulatory obstacles to institutional investment in private equity have been considered in detail by the Myners Review, which has made some preliminary suggestions on possible alternatives to the MFR and has proposed changes to
7、the treatment of limited partnerships in the Financial Services and Markets Act. The Pre-Budget Report of 8 November 2000 announced that it would consider the MFR recommendations as part of its current review and would implement changes to the FSMA making it easier for pension funds to invest in lim
8、ited partnerships. The Myners Review Group will publish its full findings before the 2001 Budget. Other potential sources of external private equity capital for TBSFs, notably business angels and corporate venturers, are also examined in this report. In view of the focus of the formal venture capita
9、l industry on larger and later-stage deals, business angels might help to fill any equity gap in the provision of seed, start-up and early-stage finance to TBSFs. Although there is evidence of such complementarity in the US, the involvement of UK business angels in this area is subject to much great
10、er uncertainty. Some investigations suggest that they allocate a much greater proportion of funds perhaps as high as 60% to start-up investments than do formal venture capitalists. If this is correct, and if current estimates that the UK has some 18,000 actual and potential business angels investing
11、 around 500mn annually are reliable, then the business angel market is potentially on a par with the formal venture capital industry in the financing of start-ups. Other studies dispute these estimates and also find that only a small proportion of angels invest predominantly in high-tech companies. The consensus, however, is that the potential does exist for business angels to fill gaps in the provision of small-scale equity to SMEs in general, and TBSFs in particular. There is certainly wider recognition of the increasingly important role of business angels, often working in partne
