US Treasury Secretary Timothy Geithner has warned the European Commission about the potential impact of the Directive on Alternative Investment Fund Managers on cross-border investment.
Geithner was referring to portions of the “Directive on Alternative Investment Fund Managers” that would make it more difficult for EU limited partners to invest with non-EU fund managers. The proposals would require foreigners trying to market in Europe to demonstrate to the relevant authorities that they are subject to “equivalent” regulation in their home jurisdiction.
US Treasury officials have been holding talks with their counterparts in the European Commission and governments in the EU about the proposals since late last year.
Meanwhile, the Institutional Limited Partners Association (ILPA) – whose roughly 220 members control the vast majority of commitments to private equity funds across the world – has also written to Barnier, warning that the diminished access to capital for EU companies will harm European private equity.
There exists a real concern that the proposal will effectively close Europe off from the capital solutions currently available through managers and institutions that comprise the global private equity industry.
ILPA also expressed concern about the likelihood of a division developing between EU and non-EU investors, as well as the loss of competitiveness for private equity-backed companies that have to disclose sensitive information.
The UK’s House of Lords wrote to Myners in December to express its view that the directive’s marketing restrictions are “protectionist”, and would also prohibit many foreign managers from raising and marketing funds in the EU. More recently the House of Lords called on the British government to reject the directive in its current form due to its “one-size-fits-all approach” to regulation, and stressed the need to ensure any European legislation was matched by comparable regulation in the US.
The UK has been at the forefront in fighting against many burdensome aspects of the directive, as British managers account for 60 percent of all European private equity activity.