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28 Jul 2009

AIMA Warns Of Global Impact Of EU Hedge Fund Directive

The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has warned that the European Commission’s draft directive on Alternative Investment Fund Managers would hit fund managers and investors around the world if enacted into European law.

The hedge fund assiciation argues that the directive creates potentially major difficulties for non-EU funds and/or non-EU managers in accessing the EU market. Marketing of funds by managers will only be allowed with a special marketing passport that the directive creates. However the directive also delays its introduction by three years and imposes significant obstacles (such as demonstrating regulatory and tax equivalence) to obtaining it.

AIMA suggests that the directive makes it so difficult and costly for non-EU funds and managers to access the EU market that it is clearly protectionist in effect, if not in intent. This will have major consequences for non-EU funds and managers (particularly in North America and Asia-Pacific) who will face a major loss of business in the EU. Investors will face loss of choice, increased costs and diminished returns.

Andrew Baker, CEO of AIMA, said, “Funds and managers outside the EU face being locked out of the EU market with extremely worrying consequences. Global industry centres such as the United States , Canada , Switzerland , Hong Kong , Singapore , Japan , Australia and South Africa , will all be affected by this. This is not just an internal EU matter.

This will also have a very significant impact on investors. EU investors, in particular, face a situation where they can use only EU asset managers of EU domiciled funds investing assets under an EU custodian. And international investors with EU funds or managers will find that their costs will go up and their returns will go down because of the restrictions and compliance costs the directive imposes.

We believe that the provisions of the draft directive with protectionist consequences will not only hit the industry worldwide but weaken the competitiveness of the EU in investment management and make the EU a less attractive destination for international investment. Naturally, we hope that it can be revised to avoid this.”

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