AIMA fears EU protectionism

THE hedge fund industry association has added its voice to concerns that the EU’s proposed directive on alternative investment funds risks protectionism.

As Brussels reviews the directive, the Alternative Investment Management Association said a rule restricting EU investors from putting money into funds in non-EU countries would have serious consequences for free trade.

A clause inserted by the Spanish presidency would limit the ability of hedge funds from places like Asia or North America to market their services to EU customers such as pension funds.

AIMA chief executive Andrew Baker said: “The practical consequence would be that the EU market would be closed to non-EU funds and managers, with obvious protectionist implications... Any restrictions imposed on European investors would also hit asset managers in financial centres [elsewhere].”

Pension funds believe their performance would be cut by 15 to 20 per cent every year as emerging markets growth would be more difficult to access, according to research by Conservative MEP Syed Kamall.

Kamall said: “It’s madness to stop EU investors who want to invest in funds that are invested in developing countries, and it’s going to have a huge impact on tomorrow’s pensioners who will see reduced returns.”

Earlier in February, the FSA warned the directive bore “significant risks” even though it had been toned down.