Europe fragmenting on hedge fund regulation
EUROPE - The European hedge fund market will become increasingly fragmented, as more countries adopt their own system of hedge fund regulation, an alternative investment consultant predicts.
The lack pan-European legislation will make entry into the hedge fund market place difficult for non-European operators.
Sophie van Straelen, managing director of Astérias, a London-based
alternative investment advisory service, said that European regulation of Hedge Funds was gradually evolving to a model where the local regulatory bodies set up specific requirements for the registration of products.
“One major consequence of this trend is the creation of several fragmented markets instead of any movement towards a single, Europe-wide, registration.
Clearly, it will become more difficult for non-European investment managers to
penetrate Europe as a zone.”
The Commission des Operations de Bourse (COB) is introducing regulations that require companies selling funds of hedge funds to be officially approved. There are strict guidelines governing the internal competences necessary
for registered products.
“One interesting development is that the size of minimum investments has been set at Euro 10,000, compared to Euro 500,000 in Italy,” says van Straelen. “Most financial institutions in France have now launched alternative products, with the intention of offering diversified products in a very competitive market.”
Other market places such as Germany or Spain are soon expected to
release new regulation, in recognition of the need to develop and retain local capabilities, she added.
“Ultimately, we could picture Europe as a defined zone for management competence with strong local distributors dominating their markets. Knowing your customers becomes even more important in such a fragmented market.”