too favorable to the Fund offshore for others

Noël Amenc, Director of the Edhec Risk and Asset Management Research Centre, points the shortcomings and inconsistencies of a draft directive on hedge fund managers (AIFM) who has managed to rally against him.

Protectionist for some, too favorable to the Fund offshore for others, this directive is almost unanimously against it. Is this the mark of a compromise unrealistic or unachievable

Indeed, since the end of April by Commissioner Charlie McCreevy, this text successfully to rally against him. Anglo-Saxon managers but also large pension funds North-Europeans, who are heavily invested in asset classes covered by the directive, consider that the text is protectionist and will weigh in the end on the profitability of the systèmes of retirement by capitalization. The first 10 Dutch pension funds come to send a letter to the European Commission for to move negative consequences of this restrictive text for the management of pensions. Embodying the results of a study of the Aima (Alternative Investment Management Association), major Dutch pension funds officials estimate that the cost of the AIFM directive would be included entre 30 and 45 billion euros. This criticism is consistent with academic studies conducted on the subject, including by the Edhec Risk, which demonstrate that the inclusion of "hedge funds" improves the ratios of solvency of the funds of pension and life insurance or funding. For their part, the françaises and German authorities consider that this text, in the end somewhat binding, can lead to a true European passport for offshore funds. Their concern is much greater that the compromise proposal, end of October by the Swedish Presidency of the Union, away from original text in a fairly liberal sense. Among the amended, it may be noted that the operating from a third country fund managers will be able offrir their services in the European Union without having to obtain a préalable authorization.

The European regulation of asset management traditionally relied on a harmonisation of the rules governing the products, including guidance on the coordinated European funds (Ucits), it appears that the Commission wants to settle for a regulation of the actors. Is this the sign of a profound change in the European regulatory framework

In its form, the greatest danger of this text is not the dissemination of specific offshoreaux funds, because they will be marketed to sophisticated investors, as is already the case today, via including British private placement regime. The main risk is that European managers receiving a label ISBA use national frameworks very lax to disseminate European hedge funds, by playing on a falsely protective regulation. In failing to provide a Community harmonisation of the rules of management of the hedge funds themselves, it opens the way to intra-Community dumping and reinforces adverse selection problems Editor's Note: inverse results to those desired a policy related to asymmetries of information and moral hazard Editor's Note: change in behaviour in an agent who does not have to bear all the consequences of his actions. In the end, this draft directive appears more as a quick response to a "political" regulatory display for cause of re-election of President Barroso, as a serious contribution to a better regulation of alternative industry. Good regulatory response to the development of alternative management in a secure framework is a clear distinction between professional investors and others. The first unrestricted access to hedge funds offshore and onshorevia would open a European private placement regime; the latter could not invest in funds onshore who could benefit from a passport.

The repository is at the heart of the future European regulation of alternative management. Is this an appropriate response to non-financial risks posed by "hedge funds" and that highlighted the Madoff case

Edhec has undertaken an important work on the regulation and financial in the whole of the value chain of the European management, with the support of Caceis industry risks. Indeed, we think narrow and dangerous to rely on the single repository for managing non-financial risks. It is clear, in fact, that the General obligation of restitution advocated by the Minister of the French economy in the Ucits framework is not realistic with regard to hedge funds, since the depositary is not liable for wrongdoer of assets which it is not directly or indirectly the conservation. It must be that all the actors in the management industry are empowered for the non-financial risk management. This point of view here, the removal of the requirement of independent assessment of hedge funds in the Swedish proposal for compromise on the AIFM directive is not in the good sense.