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Preqin survey: only 22% of hedge fund managers are compliant with forthcoming AIFMD regulations

Thursday, July 18, 2013
Opalesque Industry Update - Preqin’s recent survey of 220 hedge fund managers around the world reveals that there is still uncertainty surrounding the Alternative Investment Fund Managers Directive (AIFMD) among many managers, with 40% of managers that will be impacted by the AIFMD waiting for finalizations of regulations and further advice from their local regulators before taking action.

The AIFMD will be implemented into national law by EU member states on 22 July 2013. New Alternative Investment Fund Managers (AIFMs) will be required to comply with the directive going forwards, although existing AIFMs will have until 22 July 2014 to apply for authorization to their regulator.

These interviews also revealed that North American hedge fund managers that will be affected by the AIFMD are less prepared than their European counterparts, with 51% of North America-based respondents looking to market their funds to European investors already compliant or will be compliant by July 2014 compared to 64% of respondents based in Europe that will be impacted by the regulation.

Other Key Facts:

• 22% of hedge fund managers interviewed by Preqin that will be impacted by AIFMD are already compliant, and 3% of those affected feel they will not be compliant by the July 2014 deadline.
• 72% of hedge fund managers interviewed will be impacted by the AIFMD; 28% will not be affected, either
because they do not market within the EU or they have no active funds.
• 65% of all North America-based hedge fund managers interviewed stated that they will be affected by AIFMD.
• 44% of North America-based managers affected by the AIFMD are waiting on further advice from legislators in their jurisdiction.
• Larger hedge fund managers that will be impacted by the AIFMD are the most prepared – 65% of those fund managers interviewed with assets under management over $1bn are either already compliant or will be by July 2014, compared to just 31% and 54% of those in the $500-999mn and the $100-$499mn brackets respectively.
• There is mixed sentiment from investors over the impact of regulation launched in the industry, with 35% feeling regulations will be positive and 22% thinking the opposite. Many investors are unsure of the impact regulations will have.

Amy Bensted, Head of Hedge Fund Products, commented: “With the imminent launch of the AIFMD, the majority of hedge fund managers still have work to do in ensuring their funds are fully compliant with the regulations. Based on Preqin’s survey ofhedge fund managers based around the world, Europe-based managers seem better prepared than their North American counterparts at this stage. The phased compliance period for non-EU managers means that a number of North American funds are choosing to wait and see the initial impact of the regulations in Europe before altering their processes.

Many institutional investors have yet to be convinced about the benefits of regulation in the hedge fund industry and they will be watching closely to see the effect that the AIFMD has on the fund management industry. However, with over a third of investors believing that regulation is positive for the industry, the potential is the AIFMD “brand” could lead to greater inflows into hedge funds as investors seek out the regulator’s seal of approval. With uncertainty still surrounding the impact of the directive, it may not be possible to assess the full impact of the AIFMD on the hedge fund universe before 2014.”

Press release



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