The reduction in returns would be because the directive contains restrictions on leverage with increased compliance costs, which would limit the investment opportunities.
The Alternative Investment Fund Managers (AIFM) Directive could cost European pension funds €25bn a year through charges and lower investment returns if is implemented in its current form, the Alternative Investment Management Association (AIMA) has claimed.
Rough figures presented by the association, representing the global hedge fund industry, suggested the
AIFM Directive in its current form would increase costs to all investors and substantially reduce the range of investments available because a key part of that directive would block access to over 90% of the alternative investments which are currently accessible in Europe.
Although data is only approximate, the
AIMA has estimated around €1bn in invested in alternatives – hedge funds, private equity, real estate funds - each year by European investors, but pension fund returns could be reduced by 2.5% a year unless changes are made to the directive as investors could find they are forced to invest in more traditional assets which are accessible.
This reduction in returns would also be in part because the directive contains restrictions on leverage alongside increased compliance costs, which would limit the investment opportunities to fund managers as well as force them to pass on the regulatory costs.
© AIMA - Alternative Investment Management Association
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