Of all the misconceptions about hedge fund managers - and there are many - one of the most common is that managers are unregulated, and are determined to keep it that way. Such views are popular, yet completely at odds with reality.

In the UK and many other European countries, alternative investment fund managers must register with their national regulator, such as the Financial Services Authority (FSA), and disclose certain information to them. The UK Treasury, in its White Paper on Reforming Financial Markets that was released earlier this year, was right to stress that the UK hedge fund industry is already regulated, and that the UK regulatory regime "is among the most advanced in the world".

This is all the more telling when considered in light of the European Commission's draft Alternative Investment Fund Managers (AIFM) directive, which was published in April 2009 and is now being scrutinised in Brussels.
There are certainly elements of the directive that we do support, such as the provision for the universal registration and authorisation of managers. Like the Commission, we believe that an EU "passport" for marketing funds to investors across member states would provide a desirable resolution to cross-border marketing issues. And we agree that managers passing on systemically-relevant information to their national regulators would be helpful in terms of assessing systemic risks to financial stability.

In essence, we would support any regulatory system that strengthens the European alternative investment industry and ensures that the Union maintains its position as an attractive place in which to do investment business.
However, despite the best intentions of the Commission, we do not believe that the draft directive will actually deliver these results. Unless the current text is amended, the directive risks not only imposing a major burden on our part of the EU's financial services sector but also significantly limiting the choice available to EU investors and reducing the returns they make on their investments.

That is important, not only for hedge fund professionals but for European pensioners and savers, who would suffer because of this. It's the broader consequences of the directive like this that we are now seeking to highlight. In fact, we recognised very early on in our campaign that if the directive were seen solely as a hedge fund industry issue, it would be difficult to make policy makers listen to our concerns. So we have pointed out, for example, not only the effects on pensions but also on commercial real estate markets within the EU that could be significantly affected by the directive. That could spell trouble for a host of construction projects across the EU. Other provisions in the directive could negatively impact inward capital flows, hitting the economies of every member state.

We are working constructively with the European Commission, the member states and the relevant committees in the European Parliament in our efforts to achieve appropriate revisions to the proposal. But we are not alone in this effort.

The list of those who have been reported as expressing concern about the current form of the directive is long, and growing all the time. It includes pension funds and industry groups, European institutional investors, global banks, international law firms, commercial real estate groups, private equity firms, ministers from Sweden and the UK, as well as Irish officials, the chairwoman of the European Parliament's economic and monetary affairs (ECON) committee, the US Treasury, the German funds association, Jacques de Larosière, whose High Level Group on Financial Supervision in the EU produced an authoritative report on the current crisis, and even Charlie McCreevy, the European commissioner under whose aegis the directive was drafted. Now is the moment for all other players that may be affected to ensure that their voices, too, are heard in the debate. We are hopeful - but we are under no illusions that this will be anything other than a long and arduous campaign.

For further information, visit AIMA's website, www.aima.org, or call 020 7822 8380.