Hedge funds fear EU will rush to bring in protectionist new rules

THE private equity industry will watch with baited breath as European Union finance ministers discuss the regulation of alternative investment funds tomorrow.

Spain, the current EU president, is pushing for an early agreement on the controversial Alternative Investment Fund Managers directive. UK-based buyout groups and hedge fund managers vehemently oppose certain aspects of the draft proposal, which would force their portfolio companies to reveal their business plans like publicly listed rivals and impose tough new capital and liquidity requirements.

Most argued-over is the “third countries” section of the planned legislation, which would make it difficult for fund managers from other parts of the world to sell their products to EU customers such as pension vehicles and sophisticated investors.

The British Venture Capital Association and the Alternative Investment Management Association have branded the measure “protectionist” and urged Brussels to reconsider. At a breakfast hosted by Conservative MEP Syed Kamall a fortnight ago industry figures urged the EU not to rush through the directive.