Sweden Adds Backing to UK Call on AIFM Draft Directive

Lord Myners returned from his meeting with Swedish counterparts late last week with the support of the Swedes who assume the EU Presidency on July 1st.

While this is good news for the hedge fund and alternative investment industry, there is still a great deal of work left to do to unravel the draconian and politically motivated piece of draft regulation. The French and Germans are on notice that there will be intensive lobbying efforts by the UK Government to ameliorate the proposed legislation, but is it simply the UK with it's hedge fund stable which has the most to lose?

Capital will move to where it can do business most effectively - odd the principal of freedom of capital movement across borders should have been ignored by the EU legislators themselves. A growing chorus of hedge funds are threatening to upsticks and move operations elsewhere if the legislation goes through and realistically, there isn't much to stop them - hedge funds are hardly mega-employers and there are pools of skilled talent for back-office functions elsewhere in the world (including Hong Kong where ComplianceAsia is based).

While the French and, to a lesser extent, the Germans, are going to be subjected to intensive lobbying and political back-scratching which is par for the course in promulgating legislation, both the promoters and critics of the AIFM should be aware they are not the only players in the EU legislature.

Nor are hedge funds the only "forbidden" fruit.

Ireland, for instance, has voiced concerns over the draft Directive, not least because of the number of hedge funds administered out of Dublin, but also due to the wide-ranging net of the AIFM definition of "Alternative Investment Funds" (AIF's). The definition of AIF's are "any collective investment fund not required to be authorised as a UCITS" - in other words, any investment fund other than securities fund!

Expect battle-lines to become clearly defined and it is going to be interesting to see how proponents of the measures respond to calls they do not know what they are doing.

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