EU PLANS to clamp down on the hedge fund industry could cost European pension funds €25bn (£21.2bn) a year, the industry trade body said yesterday. <br /><br />The Alternative Investment Management Association (Aima) said plans to limit hedge funds’ leverage and to force managers to sign up to a costly disclosure regime will do “enormous” damage to their ability to generate returns. This would lower pensioners’ incomes sharply over the long term.<br /><br />Pension funds have massively increased their investment in hedge funds in recent years, making the fight against the draft directive all the more urgent, Aima said. <br /><br />It is thought that the European pension fund industry, which is worth €5 trillion, currently has nearly €1 trillion allocated to alternative investments like hedge funds.<br /><br />Aima chief Andrew Baker said: “If they suffer lower returns as a result of the directive, it’s not only Europe’s pension funds but Europe’s pensioners of both today and tomorrow who will suffer. <br /><br />“It is because of consequences like this that there needs to be a proper impact assessment conducted.”<br /><br />Last month, the Treasury refused to carry out a study into the cost of the EU directive, in direct contrevention of its own guideliness which state it should carry out a so-called “impact assessment” into EU regulation that could hurt British business.