21 September 2009
In response to a report showing the EU Alternative Investment Fund Directive will cost the industry and investors billions, Simon Walker, Chief Executive of the BVCA, said:
"As this survey illustrates, private equity makes a major contribution to the British and European economy through tax revenues, jobs and returns to pension funds - a contribution this directive puts at risk. When only two percent of investors believe a directive will improve investor protection, it is clear that it will be counterproductive.
Greater transparency and additional oversight is desirable and we support the proposal to create a pan-European passport for investment funds. The need to curb systemic risk is clear, but what we cannot accept is disproportionate regulation which would damage the operation of an industry which has not been identified as systemically dangerous or a cause of the financial crisis.
The final shape of this directive must recognise this and take into account current regulatory structures already in place via the FSA in the UK. The results of this research reveal in stark terms that the directive as currently drafted would be deeply damaging to economies across Europe."
Key findings:
• The UK hedge fund and private equity industries contribute about €6.1 billion (£5.3 billion) in tax revenues to HMRC. Open Europe said this would be enough to pay for more than 200,000 nurses, 45,000 hospital consultants or 165,000 teachers. In just two years, the tax revenues generated by alternative investment fund managers would be able to pay for the entire 2012 London Olympics, according to Open Europe. But if the tax revenues were to disappear, Open Europe said it would take a 20% increase in council tax in order to make up the shortfall.
• The European Commission's Alternative Investment Fund Managers (AIFM) directive would cost the hedge fund and private equity industries in the EU between €1.3 billion and €1.9 billion (£1.2 billion and £1.6 billion) in its first year, if implemented in its current form. The annual recurring cost would be between €689 million and €985 million (£597 million and £853 million). Respondents said their total compliance costs would increase by almost one-third on average.
• Although the AIFM directive is designed to give better protection for investors, just 2% of alternative investment fund managers' clients favour it, while 46% oppose it.
• There is evidence that the draft directive is already hampering the growth of the industry, with 8% of respondents revealing that they had delayed a launch of a fund because of the proposal. In addition, 83% of managers thought it would be more difficult to start up a new fund if the directive were implemented in its current form.
ENDS
For further information please contact:
Nathan Williams, BVCA, 020 7025 2967/07825 678 701
Notes to Editors
1. The BVCA - The British Private Equity and Venture Capital Association is the industry body for the UK private equity and venture capital industry. The BVCA has over 400 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.
The report can be downloaded from Open Europe's website at
http://www.openeurope.org.uk/research/aifmd.pdf
