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Aima slates “flawed” EU directive on alternative asset managers


The Alternative Investment Management Association has condemned as ‘flawed’ the European Commission’s proposals for regulating alternative investment fund managers, which are due to be

The Alternative Investment Management Association has condemned as ‘flawed’ the European Commission’s proposals for regulating alternative investment fund managers, which are due to be published in the form of a draft directive on 29 April.

The Alternative Investment Fund Managers Directive is expected to propose regulation of managers of hedge funds, private equity and real estate funds with EUR250m or more in assets under management. The legislation is unlikely to come into effect before 2012.

The draft has also been attacked by Paul Nyrup Rasmussen, the Socialist Party leader in the European Parliament and an outspoken critic of hedge funds, who argues that the threshold is much too high.

According to a Commission memorandum, the limit has been calibrated in order to focus supervision on ‘the areas where the risks are concentrated’, as well as to exempt start-up funds and venture capital.

It has been estimated that the directive would affect around 15 per cent of EU hedge fund managers accounting for around 76 per cent of all EU-domiciled hedge fund assets, although a very large proportion of alternative funds are domiciled in offshore jurisdictions outside the EU.

The Commission estimates the total assets of non-Ucits funds amount to around EUR2trn and the directive would also cover more than a third of managers of other types of non-retail fund.

Although the directive meets Aima’s insistence that regulation should target managers rather than their funds, the association is not happy with the result. ‘We are very concerned about the manner in which the European Commission’s directive on the industry has been drafted,’ says executive director Florence Lombard (pictured).

‘It does not appear that the drafting of the Alternative Investment Fund Managers Directive has been coordinated with the relevant international institutions. The G20 mandated the Financial Stability Board and the International Organisation of Securities Commissions to look at these issues, and it is not clear how this directive will fit in with the new international architecture established by the G20.

The drafting of the directive has been rushed through in a very tight timeframe without anything like the usual standards of consultation that we expect from the Commission. There certainly has been very little consultation with our industry, and we are worried that measures could be proposed which are inappropriate for a complex and diverse industry such as ours.’

Even though the draft directive does not appear to satisfy the industry’s critics either, Aima is concerned that that the drafting process has been subjected to undue political pressure.

‘There has been much rhetoric from various political organisations on the directive, most of which appears designed to satisfy domestic audiences ahead of the forthcoming European elections rather than to secure an effective and sensible solution to identified problems,’ Lombard says.

‘The volume of political rhetoric has been particularly baffling given that all the major reports into the current crisis, including the de Larosière report and the Turner Review, concluded that hedge funds played an absolutely peripheral role.

‘All of this is important because a flawed directive could have major negative consequences for several key European financial industries and directly affect tens of thousands of jobs in Europe.’

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