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Tomorrow the European Parliament is expected to vote through the Alternative Investment Fund Managers (AIFM) Directive. The Directive draws up new proposals to regulate the hedge funds and private equity industries in Europe. The new rules must be transposed by national governments by 2013.
Syed Kamall, Conservative MEP for London and the 'shadow rapporteur' (lead member) on the directive for the European Conservatives and Reformists group, said:
"These new rules for fund managers in the EU should be welcomed but with a degree of caution.
"This Directive is by no means a perfect piece of legislation but it looks much better now than it did in April 2009 when it was first drafted."
The Directive that will be ratified by tomorrow's vote is the product of 18 months of intense negotiations. Due to a lack of proper consultation at the beginning, the industry were rightly vocal in getting their points across. The proposal will be costly to Europe's hedge fund and private equity industries (80% and 60% reside in London respectively), but they also make good use of the EU's Single Market by allowing funds to be sold across the EU bloc without the scrutiny of each and every Member State.
Socialists and Greens in the European Parliament attempted to push protectionist measures that would make it difficult or impossible to market non-EU funds in Europe, but they were unsuccessful.
Syed Kamall continued: "I am content that we managed to agree on a text that will promote a new era of transparency in Europe whilst maintaining open markets."
"Moving forward we must keep a careful eye on the Directive's impact on smaller and medium-sized hedge funds that may not have the manpower or legal expertise to deal with some of the more costly and onerous aspects of it. We must also keep a critical eye on the ESMA, the EU's new securities watchdog."
"I'm glad that we did not adopt a 'Prison Europe' approach that would reduce investment opportunities for EU investors. Some of the largest investors in hedge funds in Europe are pension funds. With a rapidly aging population, reducing their investment choice would have been a very bad call."
"This Directive can help the City by letting 'hedgies' sell their financial products to investors all over the EU - we just need to be careful in 2018 when we review the Directive that decision-making over which funds are allowed into the EU does not move from the UK to Brussels. For now, we kept this power in London where it belongs."
