EU hedge fund plans under fire

| 20/09/2010

(FT.Com): New proposals to regulate hedge funds and private equity funds in Europe could be a “catastrophe” for the venture capital sector, industry figures warn. The concerns stem from a move byBelgian diplomats to break the deadlock that has surrounded the proposals since summer. It is being suggested that managers of funds under €500m ($652m, £417m), which are not seen to pose a systemic threat to financial markets, should be exempted from the rules. The European Private Equity and Venture Capital Association is strongly opposed to an exemption based on size alone, saying it would cut across the sector’s ability to raise funds internationally.

“Small funds invest in local innovative businesses but must raise money worldwide from institutional investors who will demand compliance with the EU directive,” says Uli Fricke, EVCA chair.
She argues that, as a result, a blanket exemption would either force venture funds to voluntarily opt into the burden of full compliance with new directive or cut their scope for international capital raising.
The EVCA says it would be better to revert to earlier drafts that proposed lighter treatment for small venture capital funds, exempting them from depositary rules, disclosure requirements and some capital rules.
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