New rules threaten London based hedge funds City "not happy" with Government's lack of defence for financial services in London
City Desk
Voices within the City of London are growing to "scrap the AIFM directive" with campaigns now in the Daily Telegraph and City AM, following a record 1,200 amendments to the proposed to the original bill, which if passed could see thousands of job losses in London.
Brussels today is debating the introduction of a directive that may results in London based hedge funds, relocating to Swtizerland or beyond because of the proposed Alternative Investment Fund Managers Directive (AIFMD).
The Bank of England has said that if the AIFM directive is introduced “systemic failure and widespread market disruption” would result.
Leading the London's case is London MEP Syed Kamall who said:
"We should all be concerned at the way this new Directive will undermine investment returns - most of our pensions are invested in hedge funds, private equity and other 'alternatives' that will be affected. We will end up with smaller pension funds and an aging workforce."
Kamall who has been briefing the City at weekly meetings has warned that the City "must engage", and at a recent event at Kleinwort Benson Syed Kamall MEP for London said:
"The City needs to engage with Brussels" to influence the regulations and directives which will shape the way in which the Financial Services industry is structured and the environment in which it is able to operate. Otherwise, other countries will seek regulations that attract financial institutions away from the City."
The AIFM directive proposes to regulate the hedge fund, private equity industries in particular, but also includes in its scope other "alternatives" such as real estate funds, investment trusts and industrial holding companies. Likely to be implemented 1-2 years, if the current timetable goes ahead and it is adopted in July of 2010 it will be implemented in 2011 or more likely in 2012.
The AIFMD in its current form would cause London private equity firms to change their business models in a number of ways. This would incur serious costs which would have the even more serious effect of starving SMEs and start-ups of much needed capital in a time when banks are not lending money. This is will drive innovators out of London and out of the EU.
Syed Kamall MEP for London said:
"Imposing onerous rules and capital requirements on the private equity industry would only reduce lending to small businesses. Start-up companies, such as garage technology firms (the Googles and Amazons of tomorrow), will face major difficulties raising funds."
Implementation of the AIFM directive if approved, by the European Commission will be one of the major problems faced by Brussels, in this unofficial campaign to clamp down on the so called "financial locusts" that are hedge funds and private equity companies.
