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CHAPTER ONE INTRODUCTION
Study Aims
1.1 The objectives of the study, as set out in the terms of reference, were to:
- Undertake a fund level performance appraisal, including an analysis of outcomes, returns to investment (bearing in mind that with only a few years of operation these may be thin on the ground) and an assessment of the management and governance of the funds.
- Assess the firm level impacts, including on turnover, productivity and employment. Employment growth ought to be assessed in the context of the funds enabling additional performance improvements within a business, rather than looking at the numbers of jobs created alone. There is also a need to understand the additional benefits brought by the funds so investigation and estimation of additionality/deadweight and displacement can be undertaken (using HM Treasury Green Book guidelines).
- Assess finance market outcomes, in particular the extent to which the creation of these funds has increased the supply of finance, levering in additional investment as opposed to simply acting to crowd out other finance.
- Consider local economy impacts, reflecting the regeneration emphasis of some of the funds.
1.3 In addition, given the overlapping nature of the funds, consideration needs to be given to how they act together and interrelate. For example, the comparison between the West of Scotland Co-investment Fund, and the separately VCLF-funded West of Scotland Loan Fund - do they complement each other, or is there some duplication of effort or crowding out? Where investment through either loan or equity funding is offered, do companies choose the easiest option or do they assess the long-term benefits / impacts of each course of action?
Structure of the Report
1.4 This report is structured as follows:
Chapter 2 summarises the methodology and the approach to the evaluation.
Chapter 3 provides an overview of the various funds, and their objectives and coherence.
Chapter 4 deals with the overall market for funds, and the evidence of market failure.
Chapter 5 considers the investments of the loan funds and the respective fund performance.
Chapter 6 considers the investments of the equity-based funds and information on performance.
Chapter 7 compares the management costs of the funds.
Chapter 8 examines the economic effect of the funds.
Chapter 9 estimates additionality and displacement.
Chapter 10 sets out the conclusions and recommendations.
1.5 The report is supported by annexes providing a profile for each of the active funds. We also include a list of investment partners of the SCF and a list of interviews.
1.6 The study is based on surveys and interviews mainly carried out in 2006, although certain data in the main report has been updated during 2007.
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