TOUGH RULES for hedge funds and private equity funds have been agreed in Brussels, ending almost two years of industry lobbying and political negotiations.
The package was hammered out by European parliamentarians, EU member states and the European Commission over the past week, after France withdrew its objections to proposals.
The package must still be approved by the full European parliament and EU member states, but these procedures are not expected to raise difficulties.
“Today, the European parliament and the member states have found an accord,” Michel Barnier, EU internal market commissioner said yesterday. “This will introduce for the first time European regulation of managers of alternative investment funds.”
In the hedge fund and private-equity sectors, there was relief that more extreme proposals – such as the introduction of leverage caps – had been either expunged or watered down.
However the industry will still face more proscriptive and detailed rules in Europe than in the US and representatives warned that the compliance burden would mean higher costs for investors.
“We’re relieved to have reached some legal certainty . . . [but] the directive . . . is imperfect legislation,” Uli Fricke, chairman of the European Private Equity and Venture Capital Association, said yesterday.
Under the new rules, capital and disclosure requirements will be imposed on “alternative” fund managers across the EU, although those handling small portfolios will face much lighter treatment.
Provisions designed to protect against potential “asset stripping” by private equity funds was one of the final areas dealt with yesterday, with limits on capital distributions for the first few years after a company is taken over by a private equity investor.
From January 2013, approved fund managers will be allowed to market their funds across the EU, rather than to seek approval on a country-by-country basis.
These pan-EU marketing rights will be extended to managers outside the 27-country bloc from 2015, provided they and their home countries meet certain conditions. – (Copyright The Financial Times Limited 2010)
