Alts. Managers Unhappy Over Hedge Fund Harmonization Rules

Jul 22 2013 | 9:59am ET

Fund managers are not fans of the Alternative Investment Fund Managers Directive, which comes into force today. 

According to a survey just released by BNY Mellon, 50% of funds believe that their organization will be disadvantaged in some way by the new regulations, which seek to harmonize regulation of hedge funds and other alternative investment vehicles based within the European Union or selling products to EU investors.

Fund managers believe the new regulations will be costly for both their firms and for investors. Respondents estimate that initial AIFMD one-off costs will range between $300,000 and over $1 million per institution. Additionally, 88% believe  the cost of running funds will increase as a result of AIFMD, with these costs being passed along to investors.

The new rules are also causing confusion. Half the survey respondents believe that uncertainty remains within their organization, while a third reveal a fear of not complying on time and of negative financial implications.

Meanwhile, 67% of respondents predict that AIFMD will result in the number of alternative funds decreasing, while 39% believe their organization will close some funds, move funds outside of the EU or merge funds together.

While fund managers may not be fans of the new directive, those surveyed believe the key benefits of AIFMD will be seen mostly by investors and in the industry's ability to distribute more widely, making funds more accessible to the end user. Just over half of respondents expect to see an increase in the amount of capital invested in alternative funds due to AIFMD.

"Despite today being the deadline to apply for authorization under AIFMD, much work remains for the industry to achieve full compliance, with our research suggesting that the burden of regulation could even lead to a lower number of funds available to investors," observes Hani Kablawi, EMEA head of asset servicing at BNY Mellon. "Despite attempts to improve investor access and information, the industry is challenged by the complexity of implementing AIFMD and the need to comply with it in the future.”

BNY Mellon surveyed 70 respondents from Europe, Asia, the US and Latin America from companies with an accumulated total of over $5 trillion assets under management.


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.