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HE ECONOMIC turbulence of the past couple of years has sent shock waves through the funds industry. Falling asset values and a lack of liquidity have led to decreased investor confidence and stagnation in the marketplace. The days of guaranteed high


returns appear to have temporarily passed in many funds, and as a result investors are giving much greater scrutiny to their investments, managers and associated service providers. This new reality, combined with the certainty of increased regulation from national and international bodies has resulted in a challenging environment for the funds industry – so what may lie ahead? One of the largest concerns of the funds industry is the European


Union’s proposed Alternative Investment Fund Managers (AIFM) Directive. Conceived following a liquidity crisis and driven by the former Prime Minister of Denmark, Poul Nyrup Rasmussen, its intentions were noble. These included enhancing transparency and investor protection, facilitating marketing of Alternative Investment Funds throughout the EU, regulating AIFMs in a single market, and providing a framework for monitoring and managing macro- and micro-prudential risks. However, despite such intentions, a recent global survey by KPMG


found that the AIFM Directive has created significant uncertainty for the Alternative Investment Fund marketplace. While this is no surprise, the scale of the uncertainty was unexpected. According to the survey,


A recent global survey by KPMG found that the AIFM Directive has created significant uncertainty for the Alternative Investment Fund marketplace


50 per cent of managers are waiting for the Directive to be finalised before committing to the location of their funds, with almost as many remaining non-committal about the location of their management businesses. Many respondents who echoed some of the recent press coverage believe the Directive will lead to lower investor returns, impair growth and potentially lead to an outflow of talent from Europe. The proposed Directive may include rules on marketing, which


effectively prevent and deter EU investors from investing in non-EU funds that are marketed by non-EU managers, but which potentially invest in EU businesses. This has particularly concerned the US-based managers, triggering a recent response from Rasmussen that he expected the US to “take some steps in the direction of the EU in two years’ time”, thus fulfilling the equivalency requirement of the Directive. However, more recently, the anxious US Treasury Secretary, Tim Geithner, in a letter to EU Internal Markets Commissioner Michel Barnier, voiced his concern that various proposals would discriminate against US firms. “We strongly hope that the rules that you will put in place will ensure that non-EU fund managers and global custodian banks have the same access as their EU counterparts,” he states. “You


June/July 2010 businesslife.je 41





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