The Commission has published a draft Directive to regulate all non-UCITS fund managers in the EU. It calls them “Alternative Investment Fund Managers”. Under the proposals:
- all significant AIFMs would need to be licensed and supervised. But there would be exemptions for those with assets under management of less than €100 million. Certain managers who do not use leverage and have five-year lock-in periods for investors would need to register only if they manage funds above €500 million. The Commission thinks this will cover around 30% of managers who manage almost 90% of assets of EU hedge funds;
- all key service providers to AIFMs would be subject to strong regulatory standards;
- there would be greater transparency;
- AIFMs would be subject to appropriate governance standards and have management systems that address risk, liquidity and conflicts;
- AIFMs could market EU-based funds to professional investors in other EU Member States. Over time (the Commission thinks three years), they would also be able to market non-EU funds from jurisdictions European regulators are happy with.
The Commission has stopped short of regulating the funds themselves and is not imposing any requirement on the manager to interfere in funds’ strategies or policies. It hopes the Directive can be adopted by the end of this year, for implementation by the end of 2011.