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27 September 2010

ECMI: Where does Europe stand on the AIFMD? - Dispelling myths and challenging realities


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In ihrem Bericht kommt ECMI zu dem Schluß, daß AIFs eine Schlüsselrolle in der Wirtschaft zukommen, sowohl als Quellen einer langfristigen Finanzierung, als auch in zunehmendem Maße als Anlagemöglichkeiten für institutionelle Anleger, einschließlich Pensionsfonds.


 Mirzha J. de Manuel Aramendía and Diego Valiante, two researchers associated with the European Capital Markets Institute (ECMI), wrote a report called Where does Europe stand on the AIMFD? Dispelling Myths and Challenging Realities.  

The report concludes that it is important to note that AIFs play a key role in the economy as sources of long-term finance and, increasingly, as investment opportunities for institutional clients, including pension funds. Aggressive returns help to build diversified investment portfolios and help to meet the liability mismatch of the pension systems, which are burdened by the ageing population and other critical issues. Regulation needs to increase transparency in this area, but this should not affect the way in which these alternative investment funds deal with risks. By definition, these funds are designed to deal with risky assets and they should be allowed to continue to do so.

The AIFMD is an important piece of legislation whose effects need to be thoroughly analysed. A cost-benefit analysis is a difficult exercise but rushing regulation does not serve any public interest, as a ‘poor regulatory action’ may be more damaging than ‘no action’. Further negotiations and discussions may be needed, to strike the right balance between the global nature of this market and the local nature of the investors. Still, it is somehow unclear what this Directive wants to achieve.
The current AIFMD proposal, in the eyes of the regulators, will certainly:
• reduce systemic risk and the use of leverage;
• increase investor protection and transparency;
• enhance market efficiency and integrity; and
• benefit the market for corporate control (less hostile takeovers and short sales).

However, many doubts surround the theoretical framework of asset allocation, and therefore some fundamentals of this Directive remain unchallenged.

Full report






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