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Euro parliament passes alternative fund edict

Investment commentators warn that fund managers need to be aware of possible changes to the alternative investment fund managers directive after its approval last week.

The European parliament voted in favour of implementing the directive, which imposes registration, reporting and initial capital requirements on any funds active in the alternative investment market from 2013.

Despite being labelled the hedge fund directive, the ruling will apply to many forms of regulated funds, including non-Ucits retail funds, investment trusts and real estate funds and will lead to changes in the day-to-day running of these vehicles.

European Fund and Asset Management Association director general Peter de Proft welcomes the European parliament’s vote. He says it will end 18 months of uncertainty that non-Ucits fund managers have faced.

However, he adds that the result of the negotiation process to date is “far from optimal” and calls on the European Union to make revisions of investment management regulation fairer.

PricewaterhouseCoopers partner Amanda Rowland says it is important for fund managers to understand that the ruling is not the last say in the AIFM directive story.

She says: “Fund managers have to remember that the AIFM directive is not final and is still subject to change. There is still work to be done and lots can change at level two.”

An industry survey by PwC found that only 2 per cent of firms in the hedge fund, private equity and real estate sectors have drafted plans for operating under the directive despite more than half of them expecting it to affect their profitability.

Rowland recommends that fund managers should keep abreast of negotiations over the directive’s final form by staying in contact with professional organisations and the FSA.

She stresses the importance of input from fund managers and says those active in areas such as joint ventures will have to fight to ensure they do not fall under its remit.

Although the directive’s shape will be determined in the coming years, Rowland believes that the industry should make immediate changes in its outlook.
She says: “Fund managers will look at the structure of their funds from today and will have to know if the AIFM directive affects them.

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