The directive, often referred to as the ‘hedge fund directive’, has been over a year in the making and has seen many spats between nations with very differing views on what it should achieve.
One of the biggest and perhaps most contentious issues was the overall strength of the directive, with France and Germany on one side pushing for almost crippling restrictions on the management of hedge funds and the UK, where over 80% of Europe’s hedge funds are domiciled, pushing for a more lenient and forgiving tack.
The agreement today has been welcomed by many parties, not least the European Fund and Asset Management Association (EFAMA) which represents asset managers from across Europe and has continually and, in some cases successfully, lobbied for an number of concessions along the way.
However, it was welcomed more for the certainty it will now give, rather than for its content.
In a statement EFAMA pointed to the increased costs the directive is likely to impose on asset managers, and which will therefore in some cases be borne by the end consumer, and highlighted the continued work still needed to be done.
It said: “The result of 18 months of negotiations is in many ways a sensible compromise, considering the starting point for negotiations. It remains a very complex piece of legislation which regulators and the industry have to now put into practice.
“Ultimately additional costs imposed on investment funds will negatively impact investor returns, which may drive investors to more lightly regulated products with weaker investor protection.”
Indeed, others were also fairly muted in welcoming the legislation, with Amanda Rowland, partner at PwC pointing out this is just the start of increased regulation in Europe.
“Today’s vote is a strong reminder to the asset management industry that a much more intrusive regulatory regime is on its way – through this directive and a raft of other changes in Europe and beyond. Managers need to start considering how their businesses will be affected and how they should respond.”
