Singapore, Asia To Suffer From EU Hedge Fund Directive

May 21 2010 | 11:57am ET

Hedge funds domiciled in the Cayman or Channel islands have been reassured that the European Union’s proposed alternative investment regulations won’t adversely affect them. Those based in Singapore may not be so lucky.

The city-state’s branch of the Alternative Investment Management Association is warning that Singaporean hedge funds could be shut out of the European market if the rules as written become law in 2012. The industry lobby is particularly concerned about a provision that would require non-EU regulators hold their countries’ hedge funds to the same standards as those in the 27-member EU.

The EU directive, which would impose strict new reporting and custody requirements on hedge funds and private equity funds, as well as possible leverage and borrowing limits, has already been approved by the bloc’s finance ministers and is making its way through the European Parliament.

“It is very disappointing that Econ has voted for this ‘investor ban’ which would effectively ban EU investors from investing outside Europe,” AIMA CEO Andrew Baker said. “This will have negative social consequences across the EU, because it will be European institutional investors like pension funds who will be affected.”

AIMA is warning that the rules will place a huge burden on Asian hedge funds, expected to be among the hottest regions for investment in the next several years.

“There may be barriers raised between the regions which will prevent one region taking advantage of capital flows from another region,” Baker said.


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