Fund of hedge fund managers will have fewer funds to choose from if the current version of the European Union directive on alternative investment fund managers is implemented, according to Trinity Fund Administration.
The directive, which was drafted in April 2009, aims to create a single EU regulatory framework for non-Ucits alternative investment funds. It proposes the regulation of managers rather than funds but has created uncertainty for the alternative investment fund industry, which is also concerned about the cost of increased regulation.
Trinity says there have been 2,000 amendments to the draft proposals but, as it now stands, marketing of non-EU funds will be allowed only to professional investors if that country has signed an information-sharing agreement with all EU member states.
This has been interpreted as informationsharing in relation to tax matters but Trinity says there are no specific details on what this would entail.
Managers running non-EU-domiciled hedge funds would only be able to sell their funds into the EU if the regulatory framework and supervisory arrangements of the non-EU country were judged equivalent to those of the directive. EU managers would also have to have similar access to that non-EU market.
Trinity believes that the directive would restrict investment choice within funds of hedge funds, with managers not having access to the full range of funds that they can currently buy.
Trinity Fund Administration director Peter O’Dwyer says: “If the directive came in now, it would be back to the future, a return to the old days when the big banks sold inefficient products to the local market. Funds of hedge funds would have fewer funds to buy.”