France and Germany to be hit by harder hedge fund rules than peers

France and Germany are piling extra restrictions on overseas hedge funds on top of basic rules laid out in new EU laws, a survey out this morning has found.
Both are “gold-plating” certain temporary rules curtailing the ability of non-EU funds – like US mega hedge funds – to market their products to investors, the study by trade group the Alternative Investment Management Association (Aima) and EY found.
It means investors in these countries could have a more restricted selection of funds to choose from compared to peers in other countries, Aima’s head of government and regulatory affairs Jiri Krol said this morning.
The UK, along with Ireland, Luxembourg and Sweden, are part of a bloc of countries not to impose additional conditions.
"Those Member States which sought the preservation of private placement regimes have provided transitional relief and refrained from imposing additional rules,” Krol said.
Under the current regime, all non-European hedge fund managers can only market their funds where a country has a so-called private placement regime in place. The survey confirms 17 countries intend to allow some form of private placement – but conditions imposed by individual governments vary.
France and Germany, for example, have attached greater importance to this private placement regime by enforcing additional rules, which give them more control over how overseas funds operate in their country.
France has put a number of extra conditions in place, effectively meaning the country is “all but closed to the private placement of open ended alternative funds,” according to the study. Meanwhile, Germany has conditions forcing overseas hedge funds to appoint a depository for cash monitoring duties.

The rules form part of Alternative Investment Fund Manager’s Directive (AIFMD), which came into force in July. States have a year-long grace period to transpose the rules.