Elements of European alternative investment directive “poorly drafted”: AIMA

Date: Tuesday, October 13, 2009
Author: Superreview.com

The Alternative Investment Management Association (AIMA) has welcomed the European Commission’s acknowledgement that their draft directive on alternative investment fund managers should be revised, but has expressed reservations that elements of the directive are “poorly drafted” and will have potentially damaging consequences to the hedge fund industry.

According to AIMA’s latest position paper on the directive, attempting to impose leverage limits for hedge funds would prevent alternative fund managers from pursuing certain investment strategies and reduce liquidity without safeguarding markets from financial risk.

AIMA has also raised concerns that requiring all custodians to be EU credit institutions would reduce the choices of possible custodians available to fund managers.

The requirement would make it impossible for EU credit institutions to appoint subsidiary custodians over shares of companies in countries in which the companies themselves are incorporated, AIMA said.

“Elements of the directive – such as those relating to leverage, depositaries, and marketing…have been poorly drafted and will have many unintended and potentially damaging consequences,” they said.

AIMA claimed in July last year that Australian fund managers would lose a major part of their foreign business if the directive was ratified, making it difficult for non European fund managers to access the market.

AIMA did not return calls before deadline.