EUROPE: Draft directive for alternative investment fund managers

Friday April 24 2009

The European Commission is due to publish its draft directive for alternative investment fund managers next Wednesday – 29th of April 2009.

This will come after months of lobbying for treating hedge funds and private equity separately.

Poul Nyrup Rasmussen President of the European Socialist party has described the draft directive, currently on consultation within the European Commission but widely leaked to lobbyists and media, as “full of loopholes”.

Some of the major concerns about the draft directive include:

* The draft directive does not cover the funds themselves but the managers of funds.Thus while fund managers would have to be registered in the EU, the funds would not: allowing off-shore funds to market their products without effective registration or regulation;

* The registration is a formality and does not include effective transparency on leverage, fees or investors. The frequency and quality of reporting is inadequate and transparency is insufficient both for investors and for regulators;

* A high threshold at Euro 250 million to be regulated thus, allowing many funds to remain outside the directive `s remit.