EUROPEAN UNION plans to crack down on hedge funds and private equity houses could cost the industries as much as €3.2bn (£2.9bn), according to the first official report into the directive.<br /><br />The study, conducted by Charles River Associates for City watchdog the FSA, also said the affected firms would be hit with annual costs of around €311m. <br /><br />The EU is planning to force fund managers to sign up to a costly registration and disclosure regime, and to adhere to caps on leverage. <br /><br />“These one-off costs are very significant and we do not think they can be justified,” said FSA asset management sector head Dan Waters.<br /><br />Hedge funds would bear the brunt, paying €1.4bn in one-off costs to comply with the directive. <br /><br />Private equity firms face one-off costs of up to €756m, but they would bear the largest ongoing costs, totalling €248m a year, the study found.<br /><br />And the report said that pension funds would be £1bn a year worse-off under the EU proposals. <br /><br />Richard Lambert, head of employers’ association the CBI, welcomed the report, saying the directive “could reduce investment returns, making it harder for people to pay for retirement”. <br /><br />City A.M. was the first newspaper to launch a campaign against the EU directive back in April.Since then, a number of City figures have spoken out against the proposals.