Private credit and hedge fund managers welcomed the agreement reached by the European Parliament and the European Union’s Council Thursday on the review of the Alternative Investment Fund Managers Directive.
Under the revised rules, money managers will continue to be allowed to delegate portfolio or risk management to third parties, while European investors will continue to benefit from access to expertise from global firms.
The agreement also includes new rules for loan origination funds, which were drawn up to foster financial stability of the EU market.
The new rules mean funds can lend on a cross-border basis subject to a single set of EU rules, but they will face higher levels of regulation when it comes to liquidity risk management, leverage and retention of loans.
EU countries and the European Commission will have 18 months to transpose the directive into the law before it is effective.
Commenting on the changes, Jiri Krol, deputy CEO and global head of government affairs at Alternative Investment Management Association, said in a news release: “We welcome most of the new rules on delegation, liquidity risk management and passporting for loan origination funds as relatively sensible. Some restrictions, such as leverage limits on loan funds, are difficult to justify but we have worked closely with policymakers to ensure they are better defined and calibrated than the original proposals.”
Deborah Zurkow, chairwoman of the Alternative Credit Council and global head of investments at Allianz Global Investors added in the release: “Private credit funds provide vital finance and liquidity to EU businesses helping them to invest, grow and create jobs across the continent. While some of the reforms introduced will support that activity, others will act as a brake. Policymakers need to nurture the sector and the ACC will continue to engage with them to ensure our members can provide much-needed capital as traditional sources of finance become less accessible.”
