EUROPE - The proposed European Union directive to regulate alternative asset managers could cost investors some €5bn (US$7.4bn), a report commissioned by UK regulator Financial Services Authorities found.
The report - conducted by US-based Charles River Associates - found the directive could lead pension funds to lose out on 25 basis points in returns if certain managers are prohibited from operating in the EU.
The directive is meant to better regulate the impact alterative asset managers have on the general economy.
One of the stipulations in the proposal is that non-EU managers will have to meet certain requirements if they plan to market their products in the EU.
The report said: "Investors expressed concern that they will no longer have access to ‘best in class' funds from across the globe, thereby reducing both the variety and quality of funds."
Charles River estimated that, if the proposal goes through as is, European investors will lose out on access to 40% of current hedge funds, 35% of private equity funds, 19% of venture capital funds and 2% of all real estate funds.
The report said European pension funds have €5trn in assets under management and over half use alternative investment managers. A loss of access of this scale could lead to a €1.4bn loss of annual returns.
Separately, the directive will lead to one-off compliance costs of €3.2bn as investment managers pay for changes to their legal structures and the costs of re-domiciling to the EU.
The report also found managers will be saddled with an additional €311m in ongoing compliance costs that will most likely be passed on to the investor.
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