New rules for hedge funds

Since the outbreak of the financial crisis, the EU has examined how to avoid a similar event in future. On 18 May, the Ecofin Council reached an agreement on a mandate for the Presidency to negotiate with the European Parliament on a directive establishing an EU framework for managers of alternative investment funds, such as hedge or private equity funds.

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The aim of the directive is to overcome gaps and inconsistencies in existing legislation. The impact of alternative investment fund managers (AIFM) on the markets in which they operate is largely beneficial, but recent financial difficulties have underlined how their activities may also serve to spread or amplify risks through the financial system. Uncoordinated national responses to the risks make efficient management of them difficult. When the directive enters into force, an AIFM with a portfolio of more than 100 million euros will be required to obtain an authorisation from national authorities to operate. This permit will also entitle them to work across borders.

Information is vital to conducting supervision and ensuring transparency. Managers must therefore regularly provide data on risk management, performance data and exposure to risks. They must also deliver a clear description of their investment policy.

The directive establishes a number of requirements in various areas, such as leverage (use of debt to finance investments), governance standards and transparency.

AIFM invest in a wide range of assets and employ different investment strategies and techniques, catering to different categories of investors.

The text will now be discussed with the European Parliament with a view to reaching an agreement in first reading.

More information:
Press release 
Webcast of public debate 
Webcast of press conference