Proposals for reform of European-wide regulation of hedge funds have been welcomed by the Alternative Investment Management Association, the...

Proposals for reform of European-wide regulation of hedge funds have been welcomed by the Alternative Investment Management Association, the global trade association.

The proposals were recently presented to the European Commission by the Expert Group on Investment Fund Market Efficiency which is made up of industry practitioners, and are part of the EC’s review of the investment funds landscape.

The report highlights the current barriers to development and suggests several solutions, such as expanding access for investors across Member States and removing unnecessary and contradictory restrictions on institutional investors. It also recommends the passporting of prime brokerage and fund administration.

AIMA also endorses proposals that the European Union approach the US Securities and Exchange Commission on the issue of dual registration.

Although US hedge fund registration was stymied by a US appeals court last month, Democrats in the House of Representatives have introduced a bill that would enshrine the registration rules into new new legislation.
The report also states that the EU fund industry is not equipped to respond to the challenges of strong competition for investor savings and a rapidly evolving demand for investment products.

“Although the UCITS framework has been critical in the fund industry’s development, its unnecessarily onerous requirements and inadequate organisational flexibility are holding the industry back.

“The consequences of these inefficiencies are reduced investor choice, untapped economies of scale, unexploited specialisation benefits and higher costs,” said the report.

According to recommendations barriers to the further successful development of European fund markets must be removed and administrative delays in getting investment funds to the market must be reduced.

Other recommendations include enabling the rapid and efficient merger of funds, allowing the pooled management of assets owned by different funds, and providing more freedoms for the depository.

This is not an optional list of measures, according to the group, but a “minimum set of actions that must be implemented in a prompt and focused manner”.

The EC has organised an open hearing on the views of the Group later this month.