EUROPE - Andrew Baker, chief executive of the Alternative Investment Management Association (AIMA), has warned that the European Union's Alternative Investment Fund Manager (AIFM) directive risks damaging hedge funds and German Spezialfonds if not carefully drafted.

Speaking to German daily Börsen Zeitung, Baker warned that badly drafted legislation could damage all of Europe, as it was not only regulating hedge funds, but managers for all alternative funds.

"Real estate funds and commodity funds are also affected," he said.

"The German Spezialfonds industry is bigger than the global hedge fund industry. Therefore, investors and local industry could be damaged more than the comparatively small hedge fund sector in the UK."

Baker said the issue was one that affected Europe's competitiveness as a region for asset management.

He insisted the AIMA was not looking to create conflict between London and Brussels, Paris or Berlin, as it was not conductive to further debate.

But he added that decisions were being reached while only looking inwards, not taking growth in regions such as China, India, Brazil or the US into account.

He said a system regulating non-European hedge funds was a "fantastic" idea, as long as the regulation followed consistent rules and kept out the bad while letting in the good.

Baker thought the European Commission had exhausted all possible ways of implementing such guidelines, but that the results were unsatisfactory, as some member states barred foreign managers while others permitted them.