19 Oct 2010
Hedge fund and private equity fund managers in the European Union will be subject to new rules after European finance ministers backed a revised version of the Alternative Investment Fund Manager Directive at their regular monthly meeting. The measures will impose capital and disclosure requirements on funds on a pan-EU basis, while introducing provisions covering depositary arrangements and manager pay.
After an initial transition period, the directive will allow funds to market across the EU, rather than have to seek approval to enter different countries individually. The so-called passports will also be available to fund managers from outside the EU bloc upon meeting certain conditions.
The passage of the directive still requires the backing of the European Parliament. But news reports Tuesday suggested that talks between MEPs, member states and the European Commission could see a final deal concluded within days.
Under the new rules, an EU passport for funds or managers based in third countries would become available two years after the rest of the new rules take effect. The current regime of national placement, where fund managers must apply in each state to sell into the domestic market, is to continue for a further three years before being phased out. The new rules are to be reviewed four years after coming into force.
In the hedge fund industry there is some relief that the directive is less bad than feared. The Alternative Investment Management Association observed that “the text … that has now been agreed by European finance ministers is a considerable improvement not only for our members but in terms of its impact on European investors.” It noted that the industry now faces a substantial compliance burden and expressed regret that national placement rules aren’t being preserved in perpetuity.
Eliza Dungworth, head of investment management at Deloitte described the impact of the directive on UK fund managers as a “costly challenge”. Addressing the expiration of national private placement she added: “There are obviously hurdles the investment management community needs to navigate.”
Others echoed the view that the AIFM Directive was an acceptable outcome given the initial draft legislation. “Hedge Funds will be pleased that the impasse has been broken and that the more toxic elements of the original proposals have been removed," saidTom Brown, head of KPMG’s fund management practice. "With the removal of uncertainty, Hedge Fund managers will now be able to start to address the impact of the Directive on their businesses.”
After an initial transition period, the directive will allow funds to market across the EU, rather than have to seek approval to enter different countries individually. The so-called passports will also be available to fund managers from outside the EU bloc upon meeting certain conditions.
The passage of the directive still requires the backing of the European Parliament. But news reports Tuesday suggested that talks between MEPs, member states and the European Commission could see a final deal concluded within days.
Under the new rules, an EU passport for funds or managers based in third countries would become available two years after the rest of the new rules take effect. The current regime of national placement, where fund managers must apply in each state to sell into the domestic market, is to continue for a further three years before being phased out. The new rules are to be reviewed four years after coming into force.
In the hedge fund industry there is some relief that the directive is less bad than feared. The Alternative Investment Management Association observed that “the text … that has now been agreed by European finance ministers is a considerable improvement not only for our members but in terms of its impact on European investors.” It noted that the industry now faces a substantial compliance burden and expressed regret that national placement rules aren’t being preserved in perpetuity.
Eliza Dungworth, head of investment management at Deloitte described the impact of the directive on UK fund managers as a “costly challenge”. Addressing the expiration of national private placement she added: “There are obviously hurdles the investment management community needs to navigate.”
Others echoed the view that the AIFM Directive was an acceptable outcome given the initial draft legislation. “Hedge Funds will be pleased that the impasse has been broken and that the more toxic elements of the original proposals have been removed," saidTom Brown, head of KPMG’s fund management practice. "With the removal of uncertainty, Hedge Fund managers will now be able to start to address the impact of the Directive on their businesses.”
