EU Hedge Fund Passport
EU Passport Expected to be Obstacle for Hedge Funds
The European Union's decision to adopt a "passport" system for foreign hedge funds and private equity funds operating within the EU is seen as a compromise compared to the stricter proposed measures that would have made things even more difficult for foreign funds. But still, the EU passport rule is expected to be a big obstacle for foreign funds looking to work in EU member countries.
U.S. hedge-fund managers may continue to face difficulties marketing their funds in Europe in the future, despite a European Union agreement on a more-lenient version of new rules for overseas hedge funds and private-equity firms, the EU's main hedge-fund lobby group said.
Under the rules, to be approved by the European Parliament, a "passport" will be created, allowing funds to operate throughout the 27-nation bloc. The passport concept will be first available in 2013 to funds based in the EU and then in 2015 to funds from outside Europe. The current private-placement regime is expected to continue before the new rules come into effect.
"In order to get the passport, a U.S. manager would have to demonstrate that they are in full compliance with the whole text of the directive—essentially that they would have to follow EU law in the U.S. That would mean that, for example, they would have to follow an EU pay code and defer potentially half their compensation for three years," the Alternative Investment Management Association's Chairman Todd Groome said in an interview Monday. Source
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