EUROPE - European fund managers are increasingly concerned about the implementation of "unclear" or "inappropriate" regulations that could increase non-financial risk, according to a survey conducted by the EDHEC-Risk Institute.

At present, the non-financial risks foremost in respondents' minds are the growing sophistication of operations (77%) and the reduced capacity of some intermediaries to guarantee deposits (59%), EDHEC said.

However, its survey - entitled 'Shedding light on non-financial risks' - also highlights fund managers' growing concerns over new regulations coming into the market, notably the Alternative Investment Fund Managers (AIFM) Directive.

Survey respondents said "transparency, information and governance" remained the top priorities for the regulation of non-financial risks. More than 90% said the regulator must ensure information was "genuinely fair, clear and not misleading".

In addition, respondents acknowledged that the industry had its own financial responsibility, with 53% denouncing the total absence of responsibility of management companies regarding restitution.

Responsibilities for the restitution of assets should be contractually defined between depositaries and asset managers, according to the fund management industry, with 68% saying this should be done at the creation of the fund.

Moreover, the depositaries should only be "unconditionally" responsible for the assets that they actually control, they said.

In the area of distribution, more than two-thirds of respondents were in favour of clarifying responsibilities according to who controls the information, with distributors having a role to play as the first line of defence for investors.

As a result, the costs of stronger protection should be largely supported by the industry and would not be totally transferable to investors, respondents said.

Strengthening the regulation would therefore result in a net cost for asset managers, depositaries and custodians, according to EDHEC.