The European Commission has issued a press release stating that it has proposed a Directive on alternative investment fund managers (AIFMs). The Commission has also published frequently asked questions on the draft Directive.
In its press release the Commission states that the aim of the draft Directive is to create a comprehensive and effective regulatory and supervisory framework for AIFMs in the European Union.
For the purposes of the draft Directive, alternative investment funds are defined as all funds that are not harmonised under the UCITS Directive.
The Commission reports that the AIFM sector in the EU is large, with around €2 trillion in assets at the end of 2008. It is also diverse and includes hedge funds, private equity funds, commodity funds, real estate funds and infrastructure funds.
The draft Directive will only apply to those AIFMs managing a portfolio of more than €100 million. A higher threshold of €500 million applies to AIFMs not using leverage (and having a five year lock-in period for their investors) as they are not regarded as posing systemic risks. According to the Commission a threshold of €100 million implies that approximately 30% of hedge fund managers, managing nearly 90% of assets of EU domiciled hedge funds, would be covered by the draft Directive.
The press release also states that the draft Directive will:
- Regulate all major sources of risks in the alternative investment value chain by ensuring that AIFMs are authorised and subject to ongoing regulation and that key service providers, including depositaries and administrators, are subject to robust regulatory standards.
- Enhance the transparency of AIFMs and the funds they manage.
- Ensure that all regulated entities are subject to appropriate governance standards and have robust systems in place for the management of risks, liquidity and conflicts of interest.
- Permit AIFMs to market funds to professional investors throughout the EU subject to compliance with demanding regulatory standards.
- Grant access to the European market to third country funds after a transitional period of three years.
The draft Directive now passes to the European Parliament and Council for consideration.
The Alternative Investment Management Association (AIMA) has already issued a press statement on the draft Directive. AIMA states that the draft Directive is not a proportionate regulatory response to any of the identified causes of the current financial crisis.
View Commission proposes EU framework for managers of alternative investment funds, 29 April 2009
View Directive on alternative investment fund managers (AIFMs): FAQs, 29 April 2009
View AIMA press release - EC Directive does not deliver proportionate response, 29 April 2009