The EU plans to snatch significant supervisory powers away from national regulators. The European Directive on Alternative Investment Fund Managers would see current exemptions for smaller funds scrapped, meaning a majority of hedge funds and private equity funds would come under the new, highly restrictive regulation.
The Directive will impose limits on leverage for funds, as well as restrict where European investors can put their money in.
The EU also plans to bring in tough measures to curb hedge fund and private equity managers’ pay. At the same time the European Parliament recommends the European Securities and Markets Authority to be handed powers to regulate short-selling.
The proposals are a setback for London, base of 80% of the alternative investment industry.