By Martin Banks - 19th August 2009
The AIFMD must be profoundly amended if we want it to work
Sharon Bowles
The commission's proposed alternative investment fund managers directive (AIFMD) could reduce choice and increase costs for investors, costing the European pension industry some €25bn, according to a new report.
The warning comes in a new report from the UK-based Alternative Investment Management Association (AIMA).
CEO Andrew Baker said, "With Europe facing strong demographic pressures as a result of an ageing population, pension funds will need strong growth and reliable returns over the coming years in order to meet future demand.
"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."
Baker has called for a full impact assessment on the proposal to "determine whether the uncertain benefits of the directive justify the certainty of massive costs".
However, the UK government has confirmed that there will be no impact assessment for the proposal due to the "foreshortened time scale on which the directive is being negotiated".
British ALDE MEP Sharon Bowles, the new chair of parliament's economic and monetary affairs committee, has also expressed concern about how the directive would affect pensioners, saying she welcomed discussions with pension funds on the issue.
In an interview with AGEFI, the French news service, she said that the AIFMD "must be profoundly amended if we want it to work".
She also warned that, should the directive come into force, pension funds would no longer be able to invest in European products, predicting they would then leave the UK, Germany and France for Dubai and Singapore.
This, she added, meant that "it is no longer a financial problem but a social problem". "It is possible to make the text fairer and more intelligent," she said.
"We already said in the Rasmussen report [on alternative management] and in the Lehne report [on transparency] that we want capital requirements for all financial institutions, but that these requirements must be based on risk."
On alternative investment funds, she said, "It involves ensuring the stability of management, the survival of the institution if there is a crisis, as long as necessary, to close activities correctly.
"The requirements will therefore be different for hedge funds which carry out a lot of short term investment and where the management is very directly active, on one hand, and for private equity, on the other hand, where the management is housed in portfolio companies and doesn't therefore disappear with the fund".
Meanwhile, eFinancial News reports that the UK treasury and the Financial Services Authority (FSA) have met with industry representatives to give an update of the state of the negotiations over the directive.
According to the article, the industry representatives were told that proposals for a general cap on how much hedge funds are allowed to borrow and rules restricting EU investors' ability to invest in non-EU funds could be dropped following discussions between member states' governments.
However, one source said, "In September everything starts happening in parliament and you can be sure there will be attempts not only to resist softening the directive, but actually to strengthen it. Everyone should be ready for that."
Both parliament and member states must agree before the AIFMD can become law.
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