Private equity industry and hedge fund groups have responded to today’s publication of a new draft European directive aimed at the alternative investment industry by saying it fails to address the true causes of the current financial crisis, and would disproportionately hit smaller firms.
But some groups, including Jersey Finance, said they supported the directive.
The draft directive was not immediately available online. However, a press release containing details about it is on the European Commission’s Internal Market’s website at www.ec.europa.eu.
The proposals, which apply only to funds with €250m under management, include a requirement for investment managers to gain authorisation from regulators to market and run funds in the EU. Capital adequacy rules will also be implemented as well as far more robust reporting and disclosure requirements, including investment holdings.
The draft Alternative Investment Fund Managers directive “is not a proportionate regulatory response to any of the identified causes of the current crisis” said Florence Lombard, executive director of the Alternative Investment Management Association, executive director, echoing the comments of others in the industry.
Added Simon Walker, chief executive of the British Private Equity and Venture Capital Associaton: “It should be obvious that this is a deeply undesirable and immensely damaging exercise which the British Government, in particular, should be doing its utmost to forestall.”
He added: “This measure is irrational in that it seeks to bring very different asset management classes such as private equity and hedge funds within the same domain, [and] contradictory in that the purpose of this exercise was supposed to be the regulation of institutions believed to pose systemic risk to the financial system. Yet as the Commission’s own press release confirms, private equity houses ‘are not regarded as posing systemic risks’.”
Pressure for greater regulation of alternative investment fund managers has been growing in recent months. The collapse of Bernard Madoff’s New York-based investment business in December, which in turn hit a number of European funds, provided a useful cautionary tale to those who argued greater transparency was needed.
Supporters
In its statement of support for the directive, Jersey Finance, the marketing arm of the Island of Jersey’s finance industry, said it welcomed the legislation “in light of the commitment of the G20 participants” to protect markets against systemic risk.
