Open Europe, an independent think tank, has published a report following two separate surveys of the alternative investment industry.
The first survey covered members of the Alternative Investment Management Association (AIMA) and the second survey covered members of the British Private Equity and Venture Capital Association.
Key findings from the surveys include:
- Alternative investment benefits Europe as a whole. Based on the surveys Open Europe estimates that the private equity sector and the hedge fund industry contributed around €9 billion in tax revenues to the EU economy in 2008.
- The draft Directive on Alternative Investment Fund Managers (AIFM Directive) does provide some benefits. For example, within market practice and reason, the basic transparency and disclosure requirements in the AIFM Directive should be welcomed by both the industry and investors. The possibility for an alternative investment fund manager to market its funds throughout the EU has the potential to enhance the Single Market and should be welcomed.
- However, 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.
- The AIFM Directive seems to provide a boost to the offshore management model, rather than an end to it. Only 23 per cent of hedge fund managers answering the survey said they would be more likely to move their funds to an EU domicile if the AIFM Directive comes into force. 27 per cent said they would be less likely to move their funds onshore, with the rest answering neither more nor less likely.
- The tight schedule and political pressure associated with the AIFM Directive has led the European Commission to break most of its own better regulation principles, which are guidelines on how new proposals should be formulated. For example the consultation period lasted less than 6 weeks (including the Christmas holidays) despite the guidelines stating that the consultation should be open for at least 8 weeks.
- The AIFM Directive has a number of issues including virtually every manager who was surveyed stating that the "one size fits all" approach is highly inappropriate.
The report sets out four steps to improve the AIFM Directive:
- Separate between different types of funds, and include exemptions for funds with little relevance for systemic risk or a specific provision and for funds that operate with a small AUM (assets under management) and/or on a regional/national market only.
- Free up investors’ choice by dropping the protectionist elements, in particular the requirements for various reciprocal agreements with non-EU countries. These should be replaced by a broad requirement for ‘prudential regulation and supervision’ in the country where the alternative investment fund or the AIFM is established.
- Bring the AIFM Directive’s organisational requirements into line with existing EU law i.e. with the equivalent requirements in the UCITS Directive.
- Scrap the restrictions on specific investment policies and reduce the Commission’s powers to add to or amend the AIFM Directive after it has been agreed by ministers and MEPs.
AIMA has also published a short press release welcoming the survey findings.
View The EU’s AIFM Directive: Likely impact and best way forward, 21 September 2009
View AIMA welcomes Open Europe survey findings, 21 September 2009