Implementing European fund manager directive 'would cost £3bn'

6 May 2009

Proposed regulations for managers of European alternative investment funds would cost up to £3 billion ($4.5 billion) to implement in the first year, according to a new report.

Professional services firm Kinetic Partners said that with annual compliance costs running into several millions of pounds after that, the planned legislation could prove "disastrous" for the hedge fund industry.

The European Commission's proposals are designed to harmonize standards of supervision for fund managers throughout the 27-member European Union.

However, Kinetic Partners said the cost of meeting the directive's enhanced capital and risk management requirements could prove ruinous for many.

Furthermore, fund managers would also have to pay out for new staff to handle the directive's proposed reporting and disclosure requirements, as well as retaining independent valuation teams, legal advisers and other consultants.

"This ill-considered directive would be disastrous for the UK hedge fund industry and prove hugely costly to the industry for almost no apparent benefit," said Kinetic Partners founder Julian Korek.

Last week, the Alternative Investment Management Association said the directive is not a "proportionate regulatory response to any of the identified causes of the current crisis".

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