EUROPE NEWS: Lords warning

The private equity real estate industry has been concerned about the lack of a voice in the ongoing debate over the European Commission’s controversial Alternative Investment Fund Managers (AIFM) directive, but at least some noise is being made by others.

Last month, a committee of British legislators warned the UK government it needed to stand up to Europe over AIFM, hitting out at the European Commission’s attempt to introduce a “one size fits all” policy. The House of Lords European Union Committee argued there were mounting concerns the UK private equity and real estate fund industry could be damaged without comparable regulation in the US.

Real estate fund managers and LPs were among those giving evidence to the committee, including research charity The Wellcome Trust. Wellcome argued the directive in its current form could prompt managers to “give up raising capital in the EU rather than comply with onerous regulations”. However, it could also penalise EU and UK managers with added layers of regulation.

The European directive would require increased disclosure of investment and also require any fund wanting to market to EU investors to prove it is subject to sufficiently rigorous regulation in its home country. This would be a blow to US-based asset managers, as the US currently does not qualify as a rigorous enough system, and US funds would not qualify for a fundraising “passport”.

A final AIFM directive was at one point expected to be passed by mid-2010, but a large number of amendments proposed by Members of the European Parliament looks set to push back any final vote.

The attempt at further regulation began as a way of reining in hedge funds, but the European Commission drafted regulations encompassing managers of alternative funds, including those managing property vehicles.