18 December 2009
Europe’s Financial Centres unite in face of AIFM Directive
The City of London, Frankfurt based BVI Bundesverband Investment
und Asset Management and Paris Europlace, the three key European
financial centres, have joined forces to safeguard the interests of
the European Alternative Investment industry in the face of the
European Commission’s draft AIFM directive.
It is generally accepted that the Commission’s original proposal
requires significant revision if it is not to adversely affect
European pension funds, other professional investors, and the
European financial services industry as a whole.
Stuart Fraser, Chairman of the Policy and Resources Committee at
the City of London Corporation, commented:
- "This is a good example of Europe’s key financial centres
working together to promote our long-term competitiveness in the
international marketplace.
- "Away from the political rhetoric and nationalist
grandstanding, it has long been accepted that any measures
adversely affecting the City of London will inevitably harm the EU
as a whole. The same goes for Paris and Frankfurt.
- "Competition and cooperation are not mutually exclusive.
- "I am more than happy to compete with other financial centres
both in Europe and across the world, so long as it is on a level
playing field – we are working closely with our European partners
to make sure this is the case."
Arnaud de Bresson, Managing Director of Paris Europlace,
added:
- "Europe has drawn on the lessons of the financial crisis and
will consolidate a safe & competitive financial industry.
- "The UCITS funds are a significant example of European success
which contributes to the promotion of the EU asset management
industry worldwide.
- "We have to build on this success to develop EU Alternative
Investment Funds through an efficient network of financial centres
such as Frankfurt, London, Paris, within a competitive European
regulatory framework."
The City of London, Initiative BVI Bundesverband Investment und
Asset Management and Paris Europlace have urged the Council and the
European Parliament to consider the following key issues in the
negotiations:
- Relations with third countries
Asset management is a global activity and in the interests of their
clients, European asset managers need to be able to delegate
portfolio management activities outside Europe. For example it is
in the interest of investors that experts in Japan can be used to
run a Japanese equity fund. To achieve the best returns and
appropriate diversification for their portfolios, European
professional investors should be allowed to continue investing in
alternative investment funds domiciled outside the EU if they wish
to do so, under their own responsibility. Therefore, the existing
national private placement regimes should be preserved so that
Member States have flexibility to determine how their professional
investors are best served.
- Level playing field
As the Directive
will impose demanding and comprehensive requirements on alternative
asset managers concerning the organisation of their business and
the protection of their clients, it is imperative that a level
playing field is delivered by EU regulation. Furthermore, in order
to strengthen the fiduciary responsibility of AIFM to act in the
sole interest of their funds, only dedicated fund management
companies should be entitled to apply for an authorisation as AIFM.
The success of UCITS demonstrates the importance of this principle.
Those fund managers will, however, need to be able to perform
certain ancillary functions in relation to the assets of the funds
in the best interests of the funds.
- Depositary liability
A strict, unlimited liability for depositaries might significantly
increase costs to investors, potentially lead to increased
concentration among custodians, with the associated systemic risks,
and result in the closure of many emerging market funds. It is
crucial to get the balance right for investors and industry
alike.
- Nationally regulated investment funds
The Directive aims to cover alternative investment funds with
systemic importance. But in its current form it would also cover a
wide range of nationally regulated fund regimes which pose no
systemic risks and which do not require a marketing passport. There
is no need for these funds to be covered by a Directive aimed at
the provision of services only to professional investors on a
cross-border basis. This will increase costs to domestic investors
with no commensurate improvement in investor protection.
The Council and the European Parliament must reconsider the
scope of the Directive. At the very least, nationally regulated
funds should only be subject to the requirements of the Directive
regarding the necessary systemic reporting to regulators. All the
provisions to protect domestic investors can safely be left to be
set at national level as is currently the case.
Ends
James Abbott
Press Officer
City of London Corporation
PO Box 270
Guildhall
London
EC2P 2EJ
Tel 020 7332 1754
Mob 07831 543 188
Email
james.abbott@cityoflondon.gov.uk