21/09/2009 Author: Suzie Neuwirth

Directive could cost EU hedge funds over $2bn a year

The European Commission’s Alternative Investment Fund Managers (AIFM) Directive will cost the EU’s hedge fund and private equity industries between £1.2bn ($1.94bn) and £1.6bn ($2.58bn) in its first year, new research has predicted.
 
If implemented in its current state, the research – produced by political think-tank Open Europe – suggests that after the first year, the annual recurring cost to the industries would continue to be between £597m ($966m)and £853m ($1.38bn) and that compliance costs will go up by approximately one third.
 
Members of the Alternative Investment Management Association (Aima) and the British Private Equity and Venture Capital Association (BVCA) took part in the survey, which showed that the draft directive is already hampering the growth of the hedge fund and private equity industries.
 
8% of respondents said that they had delayed the launch of a fund because of the proposal and 83% of managers said they thought it would be more difficult to start up a new fund if the draft directive were implemented.
 
Although the AIFM Directive is designed to give better protection for investors, just 2% of alternative investment fund managers’ clients surveyed favour the new legislation, while 46% opposed it.
 
The report commented: “Our surveys show that unless a range of amendments take place, the AIFM directive will impose substantial costs across the board, without offering sufficient benefits for the industry, investors and the wider economy… In a worst-case scenario, thousands of jobs and millions in tax revenues could be at stake.”
 
The research also found that the hedge fund and private equity industries contribute £7.9bn ($12.78bn) in tax revenues to EU governments.