Alternative Investment Management Association Representing the global hedge fund industry
With the Alternative Investment Fund Managers Directive (AIFMD) now finally starting to take effect, it is perhaps easy to forget just how much of a threat the original draft legislation posed – or the extent to which the AIFMD and the industry it will regulate have changed over the course of the last four years.
It was April 2009 when the European Commission rushed to publish the draft AIFMD, after minimal consultation with the industry and the investors it nominally sought to protect, without a proper impact assessment having been done and at a time when all the independent reports on the crisis (not least the EU’s own de Larosière report) were concluding that hedge funds had not caused the financial crisis.
The publication of the draft AIFMD would lead us to embark on perhaps the most significant campaign in AIMA’s history. We approached individual member states to explain our position and laid the groundwork for a potential future compromise by underlining that we were willing to accept elements of the AIFMD that were part of the G20 vision. We made it clear, for example, that we regarded it as desirable that appropriate European structures be put in place for the registration and authorisation of hedge fund managers. And we explained that, in theory at least, we supported measures such as a “passport” for managers that would help to create a European single market for funds.
It was necessary, however, to make it clear that we sought revisions to measures which we regarded as disproportionate or unworkable. But this was not about simply saying “no” to certain measures without offering alternative solutions. Instead, we engaged positively and constructively with policymakers and regulators across the EU, producing, with the assistance of many of our members, numerous draft amendments and other proposed changes which, we believe, influenced the final text of the AIFMD.
We also set out to construct a broad alliance with other trade bodies and investor groups and stressed the wider consequences of the AIFMD in terms of maintaining investor choice, the competitiveness of financial services in the European Union and the desirability of Europe as a destination for international investment.
We recognised that it would be difficult to make policymakers listen to our concerns if they were seen as issues only for the hedge fund industry. So we were keen to highlight important interventions by policymakers, investors, service providers and other industry bodies. These included statements by the likes of Charles McCreevy, the then European Commissioner for Internal Market and Services, who warned in June 2009 that the AIFMD could make Europe an unattractive place for investors; Patrice Bergé-Vincent, then the head of asset management regulation policy at the French regulator AMF, who suggested in October 2009 that “almost all” of the AIFMD’s original provisions needed redrafting; and Eddy Wymeersch, the Chairman of the Committee of European Securities Regulators, the predecessor to ESMA, who said simply that the draft AIFMD “really doesn’t work”. Noteworthy too was the letter from the then US Treasury Secretary Timothy Geithner to Mr McCreevy’s successor at the Commission, Michel Barnier, warning that the AIFMD as then drafted would “discriminate against US firms and deny them access to the EU market that they currently have”.
Ultimately and perhaps inevitably, given the international scope of the concerns, compromises were reached on many of the most problematic parts. Even so, the final AIFMD text remains very burdensome for the industry.
This is why we will continue to strive for clarity and revision where it is needed, as reflected by the fact that we continue to respond regularly to AIFMD-related consultations - a total of 10 AIFMD submissions to regulators in 2012; another 10 already in 2013.
And we will continue to engage closely with policymakers and regulators across Europe, both on this iteration of the AIFMD and in preparation for the revisions that will inevitably come under ‘AIFMD II’ and beyond, in order to make the regulations proportionate and effective in their original policy objectives of strengthening investor protection and improving financial stability.
This is an updated version of a column by Andrew Baker that appeared in HFMWeek recently.