Deloitte survey shows fund managers believe AIFMD will lead to less competitive market

Research from Deloitte, the business advisory firm, highlights that fund managers believe the European Commission’s Alternative Investment Fund Managers Directive (AIFMD) will lead to fewer non-EU fund managers operating in Europe resulting in a less competitive market.

The survey shows that more than two-thirds (68%) believe AIFMD will reduce the competitiveness of the EU’s alternative investment funds industry.

The same number believe the directive will result in fewer non-EU managers operating in the EU, and 61% believe AIFMD will affect their choice of fund domicile, leading to reduced choice for investors.

Stuart Opp, lead investment partner at Deloitte, said the directive continues to be controversial, and for many respondents it will add cost for marginal benefit.

It must be implemented by July 2013 and for the first time managers of non-UCITS funds, both onshore and offshore, will be required to seek authorisation under a comprehensive EU regulatory framework.

Nearly a quarter of managers surveyed also expect redemption terms to be impacted by AIFMD and more than half think leverage figures will confuse investors. “The key challenge for managers is explaining these changes to their investors,” said Opp.

Mike Hartwell, head of Investment Management at Deloitte Ireland, said: “Many commentators have suggested AIFMD is a creating a more protective European market that is sheltered from competition and this could lead to less choice. The fund managers we surveyed believe it will lead to non-EU funds leaving the European market and this, combined with some managers moving offshore, could drastically reduce the number of managers in the market, and reduce competition.”

Deloitte surveyed 23 hedge, private equity and real estate fund managers collectively managing £175bn of assets. AIFMD came into force in July 2011. It regulates how alternative investment fund managers distribute funds and operate their business. An implementing regulation from the European Commission is expected in September 2012.

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