Survey: Hedge Fund Managers Not Ready For AIFMD

Jul 18 2013 | 10:07am ET

A recent survey of 220 hedge fund managers worldwide by data provider Preqin found only 22% were compliant with the EU's Alternative Investment Fund Managers Directive.

As for the rest, Preqin said 40% are waiting for regulations to be finalized and further advice from their local regulars before taking action.

Of the managers interviewed, 72% will be affected by the AIFMD; 28% will not be affected, either because they do not market within the EU or they have no active funds.

Preqin reports that North American hedge fund managers who will be affected by the AIFMD are less prepared than their European counterparts in the same boat: 51% of the North America-based respondents looking to market their funds to European investors already compliant or will be compliant by the July 2014 deadline compared to 64% of Europe-based respondents.

Only 3% of those affected feel they will miss that compliance deadline.

Larger hedge fund managers that will be affected by the AIFMD are the most prepared, said Preqin, with 65% of those with assets over $1 billion saying they either are already compliant or will be by July 2014 compared to 31% and 54% of those in the $500-999 million and the $100-$499 million brackets, respectively.

Of the fund managers interviewed, 61% were based in North America, 28% in Europe, 8% in Asia-Pacific and 3% in Rest of World.

As for investors, 35% of 96 investors polled in an earlier Preqin survey felt the new regulations would have a positive effect on the hedge fund industry, 22% felt they would have a negative effect and many respondents reported themselves unsure of the likely impact.

Said Preqin's Amy Bensted, head of hedge fund products, in a statement:

“The phased compliance period for non-EU managers means that a number of North American funds are choosing to wait and see the initial impact of the regulations in Europe before altering their processes. Many institutional investors have yet to be convinced about the benefits of regulation in the hedge fund industry and they will be watching closely to see the effect that the AIFMD has on the fund management industry.

"However, with over a third of investors believing that regulation is positive for the industry, the potential is the AIFMD “brand” could lead to greater inflows into hedge funds as investors seek out the regulator’s seal of approval.With uncertainty stillsurrounding the impact of the directive, it may not be possible to assess the full impact of the AIFMD on the hedge fund universe before 2014.”

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