HEDGE FUNDSEUROPEAN finance ministers have agreed tough new rules for hedge funds and private equity houses, although the regime will not be as strict as many in the industry feared.
The directive, agreed in Luxembourg yesterday afternoon, will force alternative funds to comply with a costly registration regime, as well as subjecting them to restrictions on remuneration and tougher capital requirements. All alternative funds, including property funds, will have to comply.
However, the new regime will enable fund managers to market their funds across the 27-member EU bloc rather than applying for individual permission from each member state.
And in an important victory for London’s hedge fund industry – most of which is based offshore for tax purposes – these pan-European marketing rights will be made available to non-EU funds that apply for a “passport”.
The French had wanted to force non-EU funds to apply for marketing rights from each individual member state, which would have proven too costly and burdensome for some smaller firms.
However, the new passport scheme will not be up and running until two years after the rules come into force, most likely around 2015. Until then, funds will need to apply for marketing rights on a country-by-country basis.
France had also wanted the passport scheme to be policed by the new Paris-based European Securities and Markets Authority, but this demand was again vetoed by other finance ministers. Once funds have received authorisation from a national regulator, in Britain’s case the FSA, they will be given an EU-wide passport.
Mark Hoban, the financial secretary to the Treasury, said the final set of rules were a “good outcome for the sector and investors”.
“Given where we were in May, when we picked up a hospital pass from the previous government, this is a good agreement,” he told City A.M.
And trade body AIMA also said the impact of the text agreed by finance ministers yesterday would be “be far less severe than” first thought.