EESC backs controversial 'hedge fund directive'
Financial Times, May 10, 2010
The European Economic & Social Committee (EESC) has backed the Alternative Investment Fund Management (AIFM) directive, adding greater support to the controversial new rules.
The committee - which represents employers' and employees' interests - also called for uniform risk-data provision on funds covered by the directive.
Angelo Grasso, rapporteur for the EESC, said: "Within the European economy, the impact of hedge funds and private equity funds is more serious in social and employment terms than in the economic and financial sense."
Mr Grasso said alternative investment funds had been instrumental in increasing leverage and inherent risk within the financial system.
The committee also suggested a number of recommendations to improve the regulatory and supervisory framework of the alternative funds industry.
However, the amount of data funds will be expected to submit could be scalable, depending on the size of the funds and the risk attached to the investment.
It also backed calls for a leverage cap on alternative investment funds, with flexibility for managers to liquidate assets in reaction to fall in the value of assets.
The committee also backed the extension of the European passport for funds to be extended to non-European funds to ensure transparency standards are maintained.
The EESC said protection of investors and market integrity were "non-negotiable principles" whose scope should be "as wide as possible" in its response to the directive.
The directive was introduced by the European Union following the turmoil in financial markets and speculation of the effect of short selling on banking stocks, targeting hedge and private equity funds.
However, Uli Fricke, chairwoman elect of the European Private Equity & Venture Capital Association, said the AIFM directive could harm SME companies.
She said: "Rushed initiatives such as the AIFM directive will crush venture and other sources of innovation capital, putting Europe's brightest young companies at a major disadvantage."
Ms Fricke called for a rethink by the European parliament on the effect what is often called a 'hedge fund directive' could have on SMEs.