IMA and Treasury come down hard on EU proposals

Speaking at a London seminar last week, Robert Jenkins, chairman of the IMA, said he was frustrated by the way the proposal for EU regulation of the alternatives industry had been prepared.

"It is curious that the response of some European politicians to the banking crisis is to regulate the investment management industry," he said.

"Clearly, some political leaders would prefer to focus attention on those who did not cause the problem rather than attend to those who did."

Mr Jenkins vented his frustrations by stating that many European politicians were simply confusing one part of the financial services industry for another and that this case of mistaken identity meant they were blaming investment management for the sins of investment banking.

Noting the importance of investment management to finance and industry, as well as the importance of alternatives to the money management business, Mr Jenkins criticised "short-sighted" politicians, particularly German finance minister Peer Steinbrück, whose actions, he said, would damage both.

"It would appear Mr Steinbrück has forgotten his country is part of Europe," he said. "He is, no doubt, painfully conscious German industry must remain globally competitive, but he seems to forget Europe's financial industry must compete globally as well.

"Alas, Mr Steinbrück and a number of continental comrades seem determined to shoot a key part of the money management industry in the back, and themselves in the foot."

Paul Myners, financial services secretary to the UK Treasury, also spoke at an event for the Alternative Investment Management Association last week and expressed his dissatisfaction with the EU directive, describing it as restrictive and potentially damaging to the UK fund management industry.

He said the directive's impact would be too protectionist and that it still needed "major surgery" before it could be delivered.

"To deny institutional investors a global choice of fund manager would come at a direct cost to pension savers and others who rely on the returns from institutional investment funds," he said.

Respecting the custody elements of the directive, he said imposing strict liability for delegated custodians would impose "large capital costs", make investing in some emerging markets "impractical" and increase costs to investors.

On the leverage caps within the directive, he argued that systemic risks posed by the leverage of any single fund could be assessed only "in the context of wider market conditions", so capping leverage on a fund-by-fund basis could not, therefore, be "an effective protection".