Political Intentions Behind AIFMD

Financial Times
9 April, 2012

Sir,

The announcement of the latest iteration of the European Union’s  Alternative Investment Fund Managers Directive, with a two-week consultation  period falling over Easter, should have set alarm bells ringing in Downing  Street. This is no more than a blatant attack by the Franco-German axis, which  has convinced itself that the City of London is where the roots of the financial  crisis lie. Unfortunately Gordon Brown and Lord Myners did not disagree with  that approach, and a good deal of early traction has been obtained by the  promoters of this wholly misguided initiative.

Neither George Osborne nor David Cameron appears now to have the muscle to  extricate the City from the effects of the AIFMD, constrained as they are by the  pro-EU elements of the coalition, although they should be taken aback by the  latest developments, which re-establish the uncompromising hardline, anti-City  approach. At least Boris Johnson, the mayor of London, is far-sighted enough to  have highlighted the concern.

Legitimate hedge fund trading will value EU corporate and sovereign debt at  its proper level and represents a threat to EU political endeavours to paper  over the structural flaws in the EU project.

The proposed  rules relating to depositaries may, in their current form, deal a  devastating blow to the manner in which hedge funds have historically operated  in the EU, and together with limitations on leverage and risk will accelerate  the exodus of the fund manager from the EU with a potentially devastating drop  in tax revenues to the UK Treasury.

The EU intentions are political not technical. Michel Barnier, the EU  commissioner for the single market, has said that he could not care less if jobs  are lost in the City of London as a result of the introduction of AIFMD. As  matters are proceeding that is the likely outcome.

Anthony Travers, Chairman, Cayman Islands Stock Exchange