Brussels has been working overtime on financial matters, coming out with no less than three controversial documents today. Presumably the European Commission is trying to cram in as much as possible before a new Commission is appointed in September. Charlie McCreevy, the EU internal market commissioner, wants to leave his mark.
There has been much tearing of hair and gnashing of teeth by private equity managers and hedge funds over one of these documents, which proposes to introduce a pan-European regulatory framework for alternative investment managers.
The new rules, which could be substantially changed before they have to be observed, would bring all alternative investment managers into the regulatory net except those managing less than €100m, or €500m for managers who do not use leverage and have a five-year lock-in period for their investors.
This is an improvement on the €250m threshold that had been expected, at least for private equity managers, but appears to be a victory for politicians who had complained the threshold was set too high. In practice, it is likely all managers would be caught by the regulation, as few set up aiming to manage less than €100m, and investors would be ill-advised to prefer unregulated to regulated managers, particularly if they are fiduciaries.
Probably of much more interest to the traditional asset management industry is another communication out today that declares an intention to apply the same rules to sales of all packaged retail investment products. Fund managers feel disadvantaged by the current sectoral regulatory approach, which makes it much quicker and easier to get a structured product to market than an investment fund.
This is just as revolutionary as regulating alternative investment managers and asset managers are applauding the announcement, having been pushing for just such a change. Stuctured product providers may be less impressed. But is anyone looking out for investors’ interests in all this?