CONTROVERSIAL new rules to regulate the hedge funds, private equity houses and other alternative funds were overwhelmingly backed by the European Parliament yesterday.
After months of wrangling, which saw hedge fund-friendly states like the UK extract major concessions, the parliament backed the rules by 513 votes to 92 with 3 abstensions.
London hedge fund managers were yesterday toasting what one described as a “qualified victory”, after a massive industry lobbying effort saw some of the most draconian elements of the directive scrapped.
A hard cap on leverage limits and a three-year delay before offshore funds could market their products in Europe – which were described by one industry source as “business killers” – were omitted from the final draft.
However, managers of all alternative investment funds, which also include real estate funds and investment trusts, must register to operate in the EU, report data to supervisors and meet capital requirements.
Under centralised EU supervision, there will also be tougher rules on how a client’s assets are safeguarded at depositories.
The EU assembly beefed up the law by including pay rules and curbs on asset stripping on the private equity sector in a bid to stop them buying assets just for the short term.
The European Private Equity and Venture Capital Association (EVCA) said the rules were not costed and could have a serious impact on the financing of small firms and innovative companies.
The new law affects hedge funds with over £85m under management and private equity groups investing over £425m.
The new rules take effect in 2013, with a “passport” or EU marketing rights for non-EU funds not available until 2015. Until then national marketing regimes will continue but could be phased out in 2018.
Some 80 per cent of the EU’s hedge fund sector is located in London which is also Europe’s main private equity centre.