A hedge fund trade body has warned that proposed European regulations diverge too far from measures set by the G20 to regulate alternative fund managers, writes Nick Fitzpatrick. The warning comes as G20 finance ministers meet in Washington this month (22nd-23rd April).
If the European Union diverges from the path already set by the G20 on hedge fund regulation it could fragment global markets, create inconsistent regulatory requirements and result in international trade disputes, says the Alternative Investment Management Association (Aima).
Andrew Baker, chief executive of Aima, said: “The G20 summits in Washington and London set the course for a new global regulatory framework for hedge funds and other private pools of capital.
“They agreed that all hedge fund managers should be registered and authorised by their national regulators, and that managers should report systemically relevant data to those regulators in the interests of financial stability. They concluded with an unambiguous declaration that they would not follow a protectionist path.”
He says that while other members of the G20 have followed the agreed path, Europe’s Alternative Investment Fund Managers Directive (AIFM) is in danger of diverging from it through creating protectionist restrictions on non-EU funds and managers accessing EU investors, and by seeking to insert additional prescriptive product or fund-level regulation on issues like leverage and depositaries.
“None of this supports improved financial stability, which was the G20 goal. This potential divergence from the G20 path has caused significant concern globally,” Baker said.
US Treasury Secretary Timothy Geithner has written two letters on the AIFM directive to European policymakers expressing his concerns that EU investors will be effectively barred from investing with non-EU hedge fund managers.
AIMA has also warned of a potential protectionist outcome from the Directive, saying that any restrictions imposed on European investors would also hit asset managers in financial centres such as the United States, Canada, Switzerland, Hong Kong, Singapore, Japan and Australia.
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