The Alternative Investment Management Association (AIMA), the global hedge fund association, has expressed concerns over how the Alternative Investment Fund Managers Directive (AIFMD) would apply to non-EU managers and funds under proposals by a task force of the European Securities and Markets Authority (ESMA).
ESMA is responsible for giving advice on specific rules and regulations that will enable the AIFMD to be implemented under an on-going process known as ‘level 2’. AIMA said the latest proposals went further than what was required – or even permitted – by the ‘level 1’ legislation agreed last year by the European Council, the European Commission and Members of the European Parliament. The Directive is scheduled to take effect in July 2013.
In its response to an ESMA consultation exercise on the third country issues, AIMA said the proposed measures, if enacted, could have the practical effect of preventing EU investors from investing in non-EU hedge funds such as those managed from the US, Canada, Hong Kong, Singapore, Australia and Switzerland.
AIMA said that many passages of the consultation paper reintroduced the concept of “equivalence”, which was rejected during the Level 1 negotiations. Under such strict equivalence, it would be difficult for EU managers to delegate portfolio management to third country asset managers.
AIMA CEO Andrew Baker (pictured) says: “The concept of equivalence was thoroughly considered, discussed, and, importantly, dismissed during the legislative process in a number of areas, as it was apparent that it would be unworkable.”
Baker adds: “The practical implication of the proposals is that some investments into non-EU jurisdictions would become very difficult, if not impossible. Furthermore, it is difficult to imagine how the equivalence of dozens of jurisdictions could be assessed within the implementation deadline. In some parts of the proposal it’s not even clear who would be responsible for such an assessment.”