EUROPE - Jean-Paul Gauzès, rapporteur for the European Parliament's Committee on Economic and Monetary Affairs has proposed 138 changes to the European Commission's Directive on Alternative Investment Fund Managers (AIFM), in a draft report published yesterday.

Chris Verhaegen, scretary general of the European Federation for Retirement Provision (EFRP), said Gauzès had taken the interests of investors into account. "The concerns of the investor side are at last percolating into the legislation", she said. She also welcomed the work done to align the concepts of the proposed directive with that of UCITS and MiFID.

"The substantial revisions proposed to the Directive - both by Gauzès but also the Swedish EU Presidency - underline that the original draft of the Directive was deeply flawed," said Andrew Baker, CEO of the Alternative Investment Management Association (AIMA), which broadly welcomes the changes. "We look forward to continuing our dialogue with policymakers on possible further revisions and enhancements to the Directive in order to achieve a sustainable and workable outcome.

Some of the 138 amendments represent significant clarifications or responses to criticisms that have flooded in from alternative investment managers and their institutional clients over the past few months.

Of immediate relevance to pension fund investors are changes to the rules governing which managers can market to them and how. Gauzès' report narrows the definition "marketing" to an offering or placement of shares "at the initiative of an AIFM or of an intermediary", freeing-up investors to approach non-qualifying managers on their own initiative. Richard Baker, president and CEO of the Managed Funds Association (MFA), welcomes this as "a sensible definition".

There is a wholesale re-drafting of Article 19, which originally proposed a passport for third-country funds (including the majority of hedge and private equity funds that are domiciled offshore) as long as they complied with requirements on regulation, supervision, cooperation and tax matters, but set aside a three-year period for the necessary preparation in those domiciles during which managers would be unable to take advantage of the passport.

The amendment states that "Any European investor should be free to invest on its own initiative, in a third country fund in accordance with the existing national private placement regimes", and removes the reference to the three-year waiting period. Article 21, containing the details around this the three-year period, will be deleted completely.

"MFA supports the provisions of the report that retain European investors' rights to access global investment talent by preserving national private placement regimes," said Baker.

Leonardo Sforza, head of research, Europe and EU affairs, at Hewitt Associates, said there was a lot of work to be done by the EU co-legislators to ensure a coherent regulatory and supervisory framework on AIFMs and to avoid  detrimental effects.

Martin Sjöberg, director of European affairs, at the CFA Institute's Brussels office said the report makes for "an important step forward. Mr Gauzès's report certainly contains some improvements, even if a lot of work remains to be done".

"It is vital that throughout this process the voice of the investors is heard and not only that of the alternative investments fund industry," he added.

However, Verhaegen said attention should be paid to amendments 28 and 30, both to article two, where the Commission's version of the legislation is preferable. Amendment 28 in the Gauzès report proposes deletion of the Commission text which excludes IORPs from the Directive reach by referring to IORP Directive.

According to amendment 30, banks, insurance and IORPS would be excluded from the reach of the  Directive "in so far as they invest solely on their own account".