Funds lawyers brace themselves for shake-up of investment industry

Fund lawyers from the in-house and private practice spheres are turning their attention to regulation as the investment industry undergoes a shift in focus.

The introduction of the EU’s alternative investment fund managers directive (AIFMD) is set to change the way the industry works. But the chief executive of the UK’s Investment Management Association (IMA) said today that the directive was a missed opportunity that had been badly handled by politicians and the industry alike.

Speaking at The Lawyer’s funds summit in Brussels, Richard Saunders slammed the handling of the directive by European and UK politicians.

Saunders revealed that private discussions between the industry and EU officials such as former internal markets commissioner Charlie McCreevy had predicted a much better outcome for investment managers than was actually the case. He told the audience of lawyers from around the world that the directive had been politically driven.

The UK Government should also have taken a much more proactive role, said Saunders. “As so often, the British in Brussels seemed to be playing by the rules of cricket, while everybody else was playing by the rules of ice hockey,” he said.

Saunders concluded that negotiations failed to address the “fundamental intellectual flaw” at the directive’s heart, namely the proposal of a “passport” to market alternative investment funds across the EU. This mainly affects managers or funds that are not based within the union.

The speech was followed by a panel session in which Eddy Wymeersch, the former chair of the Committee of European Securities Regulators (Cesr) gave a run-down of new financial services regulations that would affect the funds industry.

Wymeersch found himself at odds with his fellow panellists on some issues. While Wymeersch argued that managers based outside the EU would be able to set up ’mirror’ structures to gain the EU passport, Jon May, general counsel for hedge fund giant Marshall Wace, said an institutional manager did not want multiple entities to manage.

Josh Dambacher, a funds partner based in the London office of US firm Schulte Roth & Zabel, agreed with May. Dambacher said mirror structures were “not practical solutions” to the problems facing fund managers in the future.

Other topics under discussion at the two-day summit include the convergence between onshore and offshore jurisdictions and alternative and traditional investment products. Speakers and delegates include general counsel for investment companies and investors such as the Man Group, Knight Vinke and the Universities Superannuation Scheme. Partners from the full range of offshore jurisdictions as well as US and UK firms are also present at the summit.