Basically, the capital programme is intended to increase the number of medium-sized domestic companies appearing in the Hungarian capital market and, particularly, on the Budapest Stock Exchange, providing an effective means of capital-raising to all enterprises sufficiently mature to enter the international market and having the potential for further growth.

Apart from that, the NTfA also supports the development of domestic enterprises and improving their competitiveness and efficiency. It can help them access new markets, extend the range of their products, and implement business development solutions which may contribute to improving their existing operations and acquisition of new clients.

The efforts to set up the NTfA reached an important milestone on 5 October 2017, when a call for applications was announced to select the fund manager for the National Stock Exchange Development Fund. Fund managers could submit applications until 3 November 2017; Széchenyi Venture Capital Fund Management Zrt. was chosen as the fund manager. Expected to be launched at the beginning of 2018, the NTfA, together with private investors, will provide capital to businesses that agree to be listed on BSE’s Xtend or regulated market and to prepare to issue equity shares on the stock market.

The selected Fund Manager will have to strive to ensure that a number of medium-sized  companies meeting the conditions set forth in the call for applications go public on the Xtend platform every year, and to also have the suitable companies execute public transactions (in a higher trading “category”) on the stock exchange (going public includes technical listing, listing and listing on the MTF market).

BSE staff will build a close professional relationship with Széchenyi Venture Capital Fund Management Zrt. related to the latter’s investment activities, focusing particularly on active searching for projects and filtering investment opportunities. Additionally, the parties will continue to hold consultations on using the support programmes and services preparing the companies for going public, and about setting the tasks and requirements related to the public issue.

An important cornerstone of the NTfA operation is that the fund manager should involve private equity as co-investment in all investments. The total term of the fund is 12 years, while an average placement period (investment period in target companies) is for 5 years. The typical investment size is HUF 1 billion (including both public and private sector investment amounts). The maximum investment amount is EUR 15 million per enterprise. It is expected that the involvement of private equity will be encouraged by such further incentive measures as yield diversion (asymmetrical distribution of gains), distribution of losses and/or making custom agreements with future private investors.

The intended uses of the capital investment will include, among other things, financing the corporate financial advisers’ costs by the fund (costs associated with listing the equity securities on the stock exchange) and other cost items also financed by the fund related to financial and legal screenings.

As a venture capital fund, the National Stock Exchange Development Fund supports the success of the Xtend market similarly to the ELITE Programme. On the one hand, it boosts supply by enabling target companies to step to the next level in terms of size (and quality also) through the investments made and contributions offered by the fund, which helps those companies get closer to being listed on the stock exchange. On the other hand, it may also have a positive effect on the demand side at the stock exchange since the fund can itself subscribe to shares during an IPO.

However, the effects of the capital programme go beyond direct benefits: the support it provides contributes to implementing the capital market infrastructure and know-how, and to improving the capital market liquidity of medium-sized companies, which may also lead to an increase in the number of quality IPOs and/or MTFs listings. The option to have part of the advisor costs and the costs of entering the market financed by the capital programme should be underlined.