Alternative Investment Management Association Representing the global hedge fund industry
Key figures voice their concerns about the Directive
“We strongly recommend a flexible approach to implementation that takes into consideration the activities of different types of investors."
Uli Fricke, chairwoman, European Private Equity and Venture Capital Association (Jan 2011)
"It is important that as new directives, regulations and guidelines come into the market that we take care to ensure they work alongside existing and anticipated directives, regulations and guidelines for other products and jurisdictions across Europe."
Gary Palmer, CEO, Irish Funds Industry Association (Jan 2011)
“The hedge fund sector has been nimble, not bureaucratic, but it's been compliant. The directive's going to reduce over time the entrepreneurial nature of hedge funds, and that’s going to be bad for investors.”
Jon May, general counsel, Marshall Wace (December 2010)
“Costs, which are a major concern for our type of funds, will go up and it is not clear there will be any benefit or extra protection provided [for the investor]."
Philip Warland, head of public policy at Fidelity International (November 2010)
"[The directive] would see property companies – from the largest Real Estate Investment Trust (REIT) down to modest family firms – face massive administration costs, reduced investor returns and could force smaller real estate companies out of business."
British Property Federation (November 2010)
"AIFM: Appalling Investment Fund Managers directive?"
Richard Saunders, chief executive of the Investment Management Association (October 2010)
“If this [the directive] is all about investor protection, then by definition that costs more. Managers will incur higher costs and pass it on.”
Pars Purewal, head of UK asset management at PwC (October 2010)
“We are particularly interested in how the passport regime, with the difficult 'equivalency' issue still to be resolved, will work in practice for African and Asian fund managers.”
Mark Kenderdine-Davies, general counsel of CDC Group, the U.K. government development finance institution and the largest private equity investor in Africa (October 2010)
“We remain unsure as to whether some of the requirements for obtaining a passport can be met in some emerging markets."
Sarah Alexander, president of the Washington-based Emerging Markets Private Equity Association, citing the likes of Rwanda and Cambodia, quoted by FTfm (October 2010)
“A proposal that limits or delays the access of third country firms to a passport – while granting EU domiciled managers and funds access to the EU market – would be discriminatory and contrary to G20 commitments. We would consider adoption of such a proposal as unfair and damaging to our shared interest in maintaining an open, global financial system."
Timothy Geithner, U.S. Treasury Secretary, in letter to French Finance Minister Christine Lagarde (October 2010)
“It would be wiser to retain private placement alongside the EU passport until we have established an EU system that investors understand and trust. If we sign up to an end-date to private placement now, before assessing if and how well the EU passport is working, this could cause a lot of uncertainty and market turmoil.”
Syed Kamall, Member of the European Parliament (September 2010)
The harsher regime proposed by the European Parliament “could act as a very significant hurdle to fundraising for these markets where flows are urgently needed”.
Richard Laing, chief executive of the UK government-owned CDC Group, the largest private equity investor in Africa (July 2010)
"The third country provisions, certainly in the Parliament version, would completely choke off the ability of emerging market funds to raise capital in Europe or for Europeans to invest in emerging market managers.”
Sarah Alexander, president of the Washington-based Emerging Markets Private Equity Association (July 2010)
"We do have our concerns because we don’t think hedge funds were the cause of the problems in our financial markets and economies. We do accept the need for regulation but it needs to be fair and proportionate."
U.K. Prime Minister David Cameron (21 May 2010)
"A week after the virtual closure of Europe’s government-bond markets and a dramatic bail-out for countries on the periphery of the euro, you might have thought the European Parliament’s Economic and Monetary Affairs Committee would have urgent things to discuss. It could have debated ways of restoring investors’ trust in the region’s bond markets, perhaps, or tried to understand why European money markets are freezing up. The same might be said of a committee of European finance ministers, which also met this week.
"Curiously, both committees thought their time would be well spent agreeing on tough new rules for an industry that has had remarkably little to do with the financial crisis."
The Economist (20 May 2010)
"The Directive could restrict the flow of capital to some of the poorest countries in the world, thereby preventing the EDFI members from achieving some of their developmental objectives."
The Association of European Development Finance Institutions (EDFI), a group of 15 government bodies investing in emerging markets, wrote to the E.U. to warn that the Directive could prevent them carrying out their work (2 May 2010)
"We do not want to limit the choice of European investors. France and Germany believe in open financial markets. All hedge funds marketed in Europe should certainly provide information to European authorities so that they can monitor systemic risk. But besides such rules agreed by the G-20, qualified investors should be free to invest in funds from all around the globe irrespective of quality standards set for state-of-the-art European hedge funds. As a result, provided they apply the rules essential to monitor systemic risk, the situation for non-EU alternative investment funds would remain unchanged.
"At a time when our fellow citizens call for more safety and security, including on financial markets, they would not understand if we eased marketing conditions for hedge funds. It is therefore up to each member state to decide whether to allow the active marketing of off-shore funds to their national investors."
Christine Lagarde, finance minister of France, and Wolfgang Schäuble, finance minister of Germany, writing in The Wall Street Journal (28 April 2010)
"I am writing you out of deep concern about proposals circulating in the European Union that would overtly discriminate against American funds. There are multiple proposals under consideration, but they would all have the effect of significantly limiting or even prohibiting non-EU investment funds from marketing in the EU, despite the fact that EU-based funds have full access to our markets ... Just as EU-based funds and custodian banks currently have full access to our market, U.S.-based funds and custodian banks should similarly not arbitrarily be denied access to the European market ... If the European Union proceeds to adopt protectionist rules that discriminate against U.S. firms and activities, I stand ready to call on Congress to pass equivalent legislation, including measures that would (i) prohibit funds that are not headquartered in the U.S. from marketing and raising money here and (ii) require all funds operating in the U.S. to use only U.S.-headquartered custodian banks."
U.S. Senator Charles Schumer expresses concern about the AIFM Directive in a letter to U.S. Treasury Secretary Timothy Geithner (24 March 2010)
"We want to reach agreement on the Directive, but more detailed work is needed in the E.U. and G20 to make sure we have a shared global approach."
Alistair Darling, U.K. Chancellor of the Exchequer (16 March 2010)
"It is fundamentally flawed and promotes protectionism under the guise of protection. We need to move in step with the international community and avoid excessive costs of capital, retain the availability of credit and liquidity and extol the benefit of an open stable and competitive single market."
Lord Myners, U.K. Treasury Minister (10 March 2010)
"We are concerned with various proposals that would discriminate against U.S. firms and deny them the access to the E.U. market that they currently have. We strongly hope that the rules that you put in place will ensure that non-E.U. fund managers and global custodian banks have the same access as their E.U. counterparts. You will see that our approach in the U.S. maintains full access for E.U. fund managers and custodians to our market.”
U.S. Treasury Secretary Timothy Geithner to European Internal Market Commissioner Michel Barnier (1 March 2010)
"It is essential to get the framework right. We urge the Council, the Commission and the Parliament not to act in haste on these complex matters. Thoughtful and proportionate resolution of these issues is necessary to deliver a regulatory framework that enhances the stability of the financial system while encouraging sustainable economic growth and development across the EU."
Dan Waters, director, Financial Services Authority (24 Feb 2010)
The Directive has "certain fundamental issues which would, in the FMLC’s view, create significant legal uncertainty leading potentially to systemic failure and widespread market disruption, unless they are appropriately amended".
Bank of England's Financial Markets Law Committee (January 2010)
"It would drive legitimate business models offshore."
Dan Waters of the Financial Services Authority (26th January 2010)
“We understand that well over a thousand amendments have been tabled by MEPs – this is unprecedented in EU financial services regulation, and shows clearly that there’s a long way to go to get the AIFM Directive into an acceptable shape."
Javier Echarri, secretary general of the European Private Equity & Venture Capital Association (26th January 2010)
“The ultimate effect of the proposal is that it still leads to an undue restriction of investment opportunities, higher costs and lower returns for investors."
Letter to European Parliament’s Committee on Economic and Monetary Affairs by 10 of the biggest pension funds in the Netherlands (January 2010)
"Alternative investment funds are an important part of the economy and while they should be regulated properly, they must not be driven out of the European Union."
Baroness Cohen, chairman of the House of Lords EU sub-committee on economic and financial affairs (11th December 2009)
U.K. opposition Conservative Party leader David Cameron matched the U.K. government's attack on the European Commission's alternative investment fund management directive, which deals with private equity and hedge funds. Cameron said he is worried that some in Europe are using the crisis to launch a "massive landgrab" against the U.K. financial sector.
U.K. opposition Conservative Party leader David Cameron, quoted by Dow Jones Newswires (8th December 2009)
“There are some in the [European] Commission who don’t fully understand the function of hedge funds, and it would be a pity if we ended up in a situation where we simply drove hedge funds out of Europe.”
UK Chancellor of the Exchequer Alistair Darling, speaking to the Wall Street Journal’s Future of Finance Initiative (7th December 2009).
The proposed changes to the Directive are a “foundation, not a perfect finalised” solution and there are still “a lot of discussions to be had”.
Directive Rapporteur Jean-Paul Gauzes on publishing his proposed amendments to the Directive (1st December 2009)
"The [proposed rules on remuneration] are the French dressing on what was already a dog’s breakfast of a directive."
The Economist (20th November 2009)
"This is a very dodgy directive that's been poorly constructed. It was produced in a hurry. It's a process that makes those who support the European Union embarrassed."
Treasury Minister Lord Myners (9th November 2009)
"We find the [European] Commission analysis of the policy problem to be vague, sweeping, and inadequate as a basis for justifying regulation.”
Report commissioned by the European Parliament’s Economic and Monetary Affairs Committee (6th November 2009)
“That kind of intervention we don’t think is a sensible thing at all. With such a cap you may be driving funds to unload at exactly the same time and thus exacerbating a sub-sectoral crisis.”
Dan Waters, retail policy director of the Financial Services Authority, says the Directive’s proposed leverage cap could exacerbate future financial crises (3rd November 2009)
“Almost all” of the Directive’s provisions need to be redrafted to make them appropriate, proportionate and adequate.
Patrice Bergé-Vincent of French financial regulator AMF (9th October 2009)
"I hope they will come forward with something more balanced. It really doesn't work."
Eddy Wymeersch, chairman of the Committee of European Securities Regulators, says the draft Directive is unworkable and needs a rethink (8th October 2009)
"We are concerned that the Directive as currently drafted will significantly restrict our ability to generate funds to pursue our charitable missions and thus reduce our impact for public good."
Excerpt of letter to the UK House of Lords EU committee co-signed by the Church of England's Church Commissioners, the Esmée Fairbairn Foundation, the Nuffield Foundation, the Paul Hamlyn Foundation, the Henry Smith Charity, and the Wellcome Trust (September 2009)
"I don't deny that there are areas that need to be improved."
Claus Tollmann of the European Commission’s AIFM team concedes that amendments to the draft Directive are necessary, during Investoregulation conference in London (30th September 2009)
“It would be foolish not to.”
Poul Nyrup Rasmussen, speaking at London’s Guildhall, responding to AIMA’s call for a European-level impact assessment (18th September 2009)
"The CBI believes that the current draft of this Directive does not deliver a proportionate and measured regulatory framework for the alternative investment fund industry. At a time of much-needed investment in corporate enterprises, we would stress the need to amend this restrictive regulation that will damage the UK and EU economy."
Confederation of British Industry (CBI) letter to the UK House of Lords EU committee (3rd September 2009)
“Investors such as insurance companies and pension funds are important arbiters. They are big users of the financial markets in their search for investments that will earn a return for the individuals who have entrusted their money to them. They need sensibly regulated markets which give them the choice to allocate assets efficiently, with a reasonable level of investor protection and a proportionate compliance cost. Unfortunately the proposed directive fails to meet any of these requirements.”
Peter Montagnon, director of investment affairs at the Association of British Insurers (2nd September 2009)
“Your focus should be elsewhere.”
Congressman Scott Garrett, a Republican from New Jersey, tells the European Parliament’s economic and monetary affairs committee that hedge funds weren’t the cause of the global financial crisis (1st September 2009)
"The inefficiencies that would sprout from the [draft directive] will ultimately need to be borne by current and future pensioners and could be reflected in higher pension premiums and lower net payout"
Dutch pension managers in a letter to the European Commission (27th August 2009)
“Restricting the pool of alternatives managers will limit [pension fund managers'] options for achieving returns and diversifying their investment portfolios.”
Consulting group Mercer (25th August 2009)
“It looks like regulatory overreaction to me. (Any new regulations) will inevitably involve costs, and those costs will inevitably end up with the investor. They always do.”
Richard McIndoe, head of pensions at the £8 billion Strathclyde Pension Fund (reported in Pensions & Investments, 10th August 2009)
"The directive, if passed in its current form, will reduce investment choice and mean that the return pension schemes can get for any level of risk will be reduced," Joanne Segars, NAPF chief executive, told Reuters. "Even a small reduction in return will have an impact on the affordability of defined benefit pension schemes," she said.
Reuters (4th August 2009)
"There are unintended consequences from the structure of the directive which would lead us to have substantially smaller choice in terms of the investments we're able to make, but also, I would imagine, a significantly increased cost to the investments we are able to make. This legislation really casts some doubt ... on how we'd be able to invest in those investments going forward. We will make sure that our voice is heard."
Kathryn Graham, Hermes Pension Fund Management (reported in Reuters, 4th August 2009)
Sharon Bowles, British MEP and new chair of the committee (the European Parliament’s Economic and Monetary Affairs Committee), said European pension funds and institutional investors faced "excommunication" from global capital markets if the draft directive on alternative investment funds was implemented unchanged. Financial Times (29th July 2009)
“I think a lot of it is ill-conceived, and badly drafted. I think the hedge fund directive, the alternative investment directive, is a case in point. I think that is immensely damaging, without actually protecting the European consumer, or the European taxpayer.”
George Osborne, Shadow Chancellor of the Exchequer, UK Conservative Party, Financial Times interview (0th July 2009)
“This directive was driven in great haste, is very confusing on many fronts and is not the solution most member states had desired"
Colm Breslin, Irish Department of Finance, reported in Irish Examiner (15th July 2009)
“The proposal goes beyond a lot of what we do want and introduces restrictions that are unjustified"
Martina Kelly, Irish Financial Regulator, reported in Irish Examiner (15th July 2009)
The UK Property Industry Alliance – which features the major industry bodies – wrote to the Treasury and FSA saying they had "identified a number of serious concerns" about the directive. Reuters (15th July 2009)
"There have been a few EU directives that looked worrying, but one could understand what they were seeking to achieve and it was possible to focus on particular clauses and seek to make them work better for investors. This does not seem to be the case with the alternative investment fund managers directive, which, if implemented as drafted, would have many consequences that in aggregate do not seem to benefit investors. The problem in amending this draft is to decide where to start."
Lindsay Tomlinson, incoming Chairman of the UK’s National Association of Pension Funds, Financial News (12th July 2009)
"If the directive was to be passed in its current form, we would be worried about the implications it would have on investment. Irish pension schemes have been steadily increasing their holdings in alternative and international asset classes and, if implemented, the directive would adversely impact their diversification strategies."
Jerry Moriarty, director of policy at the Irish Association of Pension Funds (reported in Financial News, 12th July 2009)
“The sweeping approach to fund regulation adopted by the Commission in the draft AIFM directive brings about significant drawbacks for German non-Ucits funds. Both special funds and open-ended real estate funds are already subject to stringent regulation and supervision based on the standards of the Ucits directive.”
BVI (German funds association), reported in Financial Times, 12th July 2009
“(The directive is) badly thought out or thought out with malign intent… It's a weird thing that in the fog of confusion and war the commission is proceeding to attack something in which London simply excels and was not responsible for the recent catastrophe… it is very important that we defend an industry that generates huge sums of tax for this country."
Boris Johnson, Mayor of London, speaking on the BBC’s Today programme, 9th July 2009
“It is clear to us all that the draft directive is flawed. This was perhaps inevitable given the inadequate process by which it was developed, driven by political concerns… The draft directive needs major surgery. It is perhaps easy for other European countries to make political capital out of demanding intrusive regulation of an industry of which they have little or no direct experience. But it is woefully short-sighted, bordering on a weak form of protectionism. Europe has a lot to gain from a thriving alternative investment industry and it is important to make that case with conviction.”
Paul Myners, UK Financial Services Secretary to the Treasury, 7th July 2009
“Governments’ response to the financial crisis has been compared by one senior official to that of rowdy drinkers in a bar brawl: “You wait until a fight breaks out and then take a swing at the guy you have always wanted to hit. Whether or not he had anything to do with starting the fight is not the point.” In Europe that is a pretty accurate description of how policymakers are treating hedge funds and private equity funds.
Charlie McCreevy, the internal market commissioner, has presented drafts of a directive that would impose stark restrictions on these more lightly regulated parts of the financial system. Among other things, he wants to drag funds onshore and cap leverage.
These are bad measures, politically motivated. The French and German governments, in particular, want to blame these foreign “locusts” and “asset-strippers” for domestic failures. Indeed, the political roots of this plan show through in the text. Try as it might, the commission cannot explain why, exactly, it is proposing this hotchpotch.”
Financial Times editorial, July 5th 2009
“The Association is concerned that the proposed provisions on depositaries could have significant impact on the existing depositary framework as well as potential negative consequences for both investors and asset managers.”
The Association of Global Custodians letter, (a group of global custodian banks), 3rd July 2009
“Take that draft directive on hedge funds and private equity, a ragbag of measures requiring more disclosure, greater controls over leverage and tighter restrictions on non-EU funds. Some of these ideas make sense: more disclosure will help regulators to monitor the systemic risks that may be building outside the banks. But the poorly drafted proposal lumps different types of manager together. Controls on liquidity make much more sense for hedge funds than they do for private equity, for instance; the reverse could be argued for leverage limits.
And why on earth is the EU concentrating its fire on hedge funds and private-equity firms anyway? Some behaved irresponsibly during the boom times, to be sure, and many have been caught up in the bust. But they were not the cause of the crisis. Long-standing hostility to alternative investments on the part of the French and Germans is a better explanation for the desire to regulate them; the enfeebled status of Britain, the industry’s main defender in the EU, for why that has translated into action now. Most of the signs are that the rules are not quite bad enough to drive fund managers out of the EU; but they are still a step backwards—a piece of shoddy financial politicking. The more sensible Swedes, who took over the EU’s rotating presidency on July 1st, should bin most of them.”
The Economist, 2nd July 2009
“It is not private equity that caused the crisis, nor hedge funds. But in some countries, the political debate portrays private equity and hedge funds as the problem... That’s not the same as saying we shouldn’t regulate them. But the aim is to have sound regulation and not to kill the industry… I wouldn’t say the Commission’s proposal on hedge funds is bad, but it’s a raw diamond that needs to be polished more… It’s easy to find scapegoats.”
Mats Odell, Sweden’s Financial Markets Minister, reported in the Financial Times, 1st July 2009
"Most commentators agree that alternative investments such as Hedge Funds and private equity were not the primary causes of the crisis… I would hope that in the debate ahead people on all sides would bear in mind that Europe is going to need all the investment it can get to move out of the crisis. We must not end up making Europe an unattractive place for investors."
Charlie McCreevy, European Commissioner for Internal Market and Services, 26th June 2009
“I have some doubts on the wisdom of some aspects of this proposal.”
Jacques de Larosière, Chairman, High Level Group on Financial Supervision in the EU, 24th June 2009. He added that that his report did not consider hedge funds a systemic issue and that the directive went “much further” than his report recommended.
"It's hard to find a kind word to say about a directive so disproportionate in scope, so protectionist in its effect, and so poorly drafted."
Sir James Sassoon, Advisor to the UK’s Conservative Party on Financial Regulation, 24th June 2009
Lord Turner, Chairman of the UK’s Financial Services Authority, speaking in London on the 24th of June, said that he thought there was a danger that hedge funds would become a “target” in Europe - despite the fact, he said, that his report and the de Larosière report concluded that they did not play a major part in the crisis.
"Perhaps out of necessity, it was produced under extraordinary time pressure. This has yielded a directive whose scope and content are a surprise and in many cases a complete shock to the markets that are affected. The impact analysis, performed at a high level on the back of the early general thoughts, could not possibly have addressed the myriad detailed impacts of the sweeping scope of this directive."
Dan Waters, Asset Management Sector Leader, UK Financial Services Authority, 24th June 2009
"The content of some proposals, especially those on regulation of Alternative Investment Funds, was rushed with insufficient consultation and a weak assessment of likely impacts."
House of Lords EU Committee report, 17th June 2009