AIFM - the end is nigh

Emanuel Eftimiu
28 May 2010

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The contentious AIFM Directive is now on the final stretch. Having passed its three
main hurdles, with the ECON and JURI committees and EU finance ministers largely
approving the regulations, the final process, the so-called trilogue, can begin - wherein the council, parliament and commission will seek to agree on a common text.

The Directive has certainly been some time in the works, although not nearly as long as
the time required for other less significant regulations to reach this stage. It has seemingly been put on a fast track, which unfortunately has meant that a more sensible draft has given way to political point-scoring. And while Germany and France seemed less concerned about the implied protectionist stance of issues such as third country rules, surely there is a consensus that the disclosure requirements for private equity- and venture capital-backed companies puts such businesses at a disproportionate disadvantage?

Ironically, a directive that originated from the backlash against highly-leveraged buyouts
and the unrelated hedge fund industry will now severely affect the lower end of the private equity buyout spectrum and a vast swathe of venture capital firms. At a time when the European economic recovery is shaky at best, putting venture capital investments under unnecessary duress is certainly ill-advised. Or, as one industry representative recently put it: "Europe is less shooting itself in the foot than squarely in the temple."