EU directive 'will cost hedge funds over £1bn'

A report commissioned by the Financial Services Authority (FSA) has revealed that new European Union (EU) regulations could leave hedge funds worse off by more than €1.4 billion (£1.2 billion) a year.

The Alternative Investment Fund Management Directive has already attracted fierce criticism from some corners of the financial services industry due to the cost implications, as well as the EU’s decision to adopt a ’one size fits all’ model for the wealth management sector.

Conducted by independent consultants Charles River Associates, the FSA report states that hedge funds and private equity firms also face one-off compliance costs of €3.2 billion as a result of the directive.

In an interview with Bloomberg, the FSA’s director of retail policy Dan Waters said that such costs will be ’very, very significant’ for the private equity industry.

’In the current fragile economic environment do you want to be burdening alternate sources of capital that can be used to get things up and running?’ he added.

According to the Daily Telegraph, Treasury minister Lord Myners has flown to Spain to discuss the issue with Spanish finance minister Elena Salgado, as Spain is due to take over the European presidency next year.
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