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AFP – The European Central Bank has warned that European Union plans to regulate hedge funds and private equity groups could tilt the playing field against EU companies.
The ECB’s position could influence the rewriting of proposed rules drafted by the European Commission.
“The ECB supports the intention to provide a harmonised regulatory and supervisory framework for the activities of alternative investment fund managers (AIFMs) in the European Union,” it said in an opinion requested by the Council of the European Union.
Reuters – The European Central Bank has warned that EU plans to tighten regulation of hedge funds and other alternative investors risk creating a two-tier playing field that could drive the industry out of Europe.
European governments and the European Parliament have the final say on a new law that will require a wide range of alternative investment fund managers to register and disclose information to supervisors if they want to operate in the 27-nation bloc.
Reuters – Hedge funds and private equity could face more than 3 billion euros in costs and investors could see fund choice shrink by up to 40 percent due to proposed new EU rules, a Financial Services Authority report said.
The analysis of the impact of the Alternative Investment Fund Managers (AIFM) directive conducted by Charles River Associates and commissioned by the FSA found that it could load one-off costs of up to 3.2 billion euros on the affected parts of the funds industry.
Telegraph.co.uk – Coupland Cardiff’s chief operating officer Deborah Boyce said: “As we invest exclusively in Asia, this Directive will mean that we have no choice but to relocate outside of the EU should we wish to continue to operate.”
She was one of a host of figures from the private equity and hedge fund industry to attack the draft Directive in response to a call for evidence from a UK parliamentary committee.
Private equity group CVC said: “It is so poorly drafted that it creates a new category of risks and inefficiencies”.
New York (HedgeCo.net) – Based on two surveys of private equity managers and hedge fund managers, carried out during August 2009, Open Europe has published the most comprehensive study to date of the likely impact of the EU’s proposed Alternative Investment Fund Managers (AIFM) Directive. Among the findings is that the hedge fund and private equity industries contribute €9 billion ($13.3 billion) in tax revenues to European Union (EU) governments.
Open Europe said that the €9 billion ($13.3 billion) tax contribution would be enough to fund the EU’s entire overseas aid budget for 12 years. The tax contribution also matches the value of the EU’s Cohesion and Aid Programmes for Poland and is just short of the subsidy that France receives each year under the EU’s Common Agricultural Policy.
“Alternative investment fund managers provide investments and create growth, jobs and more efficient markets across Europe,” the report said.
The survey also found that the UK hedge fund and private equity industries contribute about €6.1 billion ($9 billion) in tax revenues to HMRC. Open Europe said this would be enough to pay for more than 200,000 nurses, 45,000 hospital consultants or 165,000 teachers. In just two years, the tax revenues generated by alternative investment fund managers would be able to pay for the entire 2012 London Olympics, according to Open Europe. But if the tax revenues were to disappear, Open Europe said it would take a 20% increase in council tax in order to make up the shortfall.
The European Commission’s Alternative Investment Fund Managers (AIFM) directive would cost the hedge fund and private equity industries in the EU between €1.3 billion and €1.9 billion ($1.9 billion and $2.8 billion) in its first year, if implemented in its current form. The annual recurring cost would be between €689 million and €985 million ($1 billion and $1.4 billion). Respondents said their total compliance costs would increase by almost one-third on average.
The report commented: “Our surveys show that unless a range of amendments take place, the AIFM directive will impose substantial costs across the board, without offering sufficient benefits for the industry, investors and the wider economy… In a worst-case scenario, thousands of jobs and millions in tax revenues could be at stake.”
Open Europe received 121 responses from hedge fund managers and fund of fund managers representing $342 billion assets under management. Just over half of the respondents came from managers located in the UK, while over one-fifth came from the rest of the EU and around one-quarter from the rest of the world. Open Europe also received 41 responses from private equity managers primarily based in the UK, representing funds under management of over $204 billion.
Alex Akesson
Editor for HedgeCo.net alex@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Bloomberg – The European Union’s proposed rules for hedge funds and private equity firms may cost as much as 1.9 billion euros ($2.8 billion) in the first year and 985 million euros annually thereafter, an industry survey says.
The Directive on Alternative Investment Fund Managers would regulate and place capital requirements on any funds managing more than 100 million euros. The proposed measure would boost compliance costs by about a third, according to the survey of 121 hedge-fund managers and 41 private-equity managers managing a combined $550 billion, according to Open Europe, a London- based research organization.
HedgeCo.net (West Palm Beach) – The Alternative Investment Management Association, (AIMA) has launched a Directive Centre on their website as part of an on-going campaign to have the European Commission’s draft directive on Alternative Investment Fund Managers revised.
It is intended as a resource for journalists and members of the public and contains everything relevant for our campaign, including press releases, guidance notes, FAQs and other resource materials issued by AIMA; speeches and articles on the directive and links to relevant documents, including the European Commission’s directive and details of its legislative process; and a quotations section featuring a host of different figures expressing their concern about the directive.
Those quoted expressing concern or reported as doing so include pension funds and pension fund industry groups, European institutional investors, global banks, international law firms, commercial real estate groups, private equity, Swedish and UK ministers, Irish officials, the chair of the European Parliament’s ECON committee, the US Treasury, the UK Conservative party, the Mayor of London, the German Funds association, the Financial Times and the Economist, and even Robert Peston, Jacques de Larosiere and Charles McCreevy.
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HedgeCo.net (West Palm Beach) – The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has warned that the European Commission’s draft directive on Alternative Investment Fund Managers would hit fund managers and investors around the world if enacted into European law.
The hedge fund assiciation argues that the directive creates potentially major difficulties for non-EU funds and/or non-EU managers in accessing the EU market. Marketing of funds by managers will only be allowed with a special marketing passport that the directive creates. However the directive also delays its introduction by three years and imposes significant obstacles (such as demonstrating regulatory and tax equivalence) to obtaining it.
AIMA suggests that the directive makes it so difficult and costly for non-EU funds and managers to access the EU market that it is clearly protectionist in effect, if not in intent. This will have major consequences for non-EU funds and managers (particularly in North America and Asia-Pacific) who will face a major loss of business in the EU. Investors will face loss of choice, increased costs and diminished returns.
Andrew Baker, CEO of AIMA, said, “Funds and managers outside the EU face being locked out of the EU market with extremely worrying consequences. Global industry centres such as the United States , Canada , Switzerland , Hong Kong , Singapore , Japan , Australia and South Africa , will all be affected by this. This is not just an internal EU matter.
This will also have a very significant impact on investors. EU investors, in particular, face a situation where they can use only EU asset managers of EU domiciled funds investing assets under an EU custodian. And international investors with EU funds or managers will find that their costs will go up and their returns will go down because of the restrictions and compliance costs the directive imposes.
We believe that the provisions of the draft directive with protectionist consequences will not only hit the industry worldwide but weaken the competitiveness of the EU in investment management and make the EU a less attractive destination for international investment. Naturally, we hope that it can be revised to avoid this.”
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Now that some policymakers are shifting out of crisis mode, some of the competitive considerations that dominated regulatory discussions during the tenure of former U.S. Treasury Secretary Henry Paulson are re-emerging. Nowhere is this more apparent than in contrasting approaches to regulation of alternative investment fund managers–hedge funds and private equity firms–being considered by the E.U. and the United States.
Reuters UK – A draft European Union law that will require hedge fund managers to be authorised needs refining to cover other types of alternative investments better, a senior MEP said on Tuesday.
The Alternative Investment Fund Managers law is before the European Parliament and EU states for adoption, but is already subject to heated debate.
It covers many types of investments that do not come under the EU’s long-standing mutual funds framework known as UCITS.
Independent – A new EU directive aimed at tightening up the regulation of hedge funds could be counter-productive and cause a mass exodus of business from the International Financial Services Centre, a Dail committee was told yesterday.
The directive, being prepared under the supervision of EU Commissioner Charlie McCreevey, has run into opposition from almost every EU country and is unlikely to be finalised before the end of the current Swedish presidency, the Dail Committee on European Scrutiny was told yesterday.
The draft Alternative Investment Fund Managers Directive has been the subject of submissions from every EU member state, Colm Breslin of the Department of Finance told the committee.
MONACO (Reuters) – Former Insight Investment fund managers Patrick Armstrong and Ana Cukic-Armstrong have launched a new fund management business that will invest in a broad range of assets and seek to beat inflation.
The firm, Armstrong Investment Managers, will try to combine hedge fund-style flexibility with the liquidity and lower fees of traditional asset management. It will launch funds for retail, high net worth and pension fund investors at the end of the summer, Patrick Armstrong told Reuters on Tuesday.
The pair were co-heads of the multi-asset group at Insight Investment, now owned by Lloyds Banking Group. They ran around 1.2 billion pounds in assets including the Diversified Target Return fund, which over the past three years fell 2 percent, beating an average 11 percent fall among peer funds.
"We think there is a middle ground between traditional funds and hedge funds," Armstrong said. "Hedge funds have been opaque, illiquid and had very high charges."
