21 September 2009

AIMA welcomes Open Europe Survey findings

The Alternative Investment Management Association (AIMA) – the global hedge fund industry association – has welcomed the findings of a survey of its members and those of the British Private Equity and Venture Capital Association (BVCA) by independent think-tank Open Europe. Among the findings is that the hedge fund and private equity industries contribute €9 billion (£7.9 billion) in tax revenues to European Union (EU) governments.

Open Europe said that the €9 billion tax contribution would be enough to fund the EU’s entire overseas aid budget for 12 years. The tax contribution also matches the value of the EU’s Cohesion and Aid Programmes for Poland and is just short of the subsidy that France receives each year under the EU’s Common Agricultural Policy, according to Open Europe.

“Alternative investment fund managers provide investments and create growth, jobs and more efficient markets across Europe,” declared the report.

The survey also found that:

The UK hedge fund and private equity industries contribute about €6.1 billion (£5.3 billion) in tax revenues to HMRC. Open Europe said this would be enough to pay for more than 200,000 nurses, 45,000 hospital consultants or 165,000 teachers. In just two years, the tax revenues generated by alternative investment fund managers would be able to pay for the entire 2012 London Olympics, according to Open Europe. But if the tax revenues were to disappear, Open Europe said it would take a 20% increase in council tax in order to make up the shortfall.
The European Commission’s Alternative Investment Fund Managers (AIFM) directive would cost the hedge fund and private equity industries in the EU between €1.3 billion and €1.9 billion (£1.2 billion and £1.6 billion) in its first year, if implemented in its current form. The annual recurring cost would be between €689 million and €985 million (£597 million and £853 million). Respondents said their total compliance costs would increase by almost one-third on average.
Although the AIFM directive is designed to give better protection for investors, just 2% of alternative investment fund managers’ clients favour it, while 46% oppose it.
There is evidence that the draft directive is already hampering the growth of the industry, with 8% of respondents revealing that they had delayed a launch of a fund because of the proposal. In addition, 83% of managers thought it would be more difficult to start up a new fund if the directive were implemented in its current form.
The report commented: “Our surveys show that unless a range of amendments take place, the AIFM directive will impose substantial costs across the board, without offering sufficient benefits for the industry, investors and the wider economy… In a worst-case scenario, thousands of jobs and millions in tax revenues could be at stake.”

Open Europe received 121 responses from hedge fund managers and fund of fund managers representing $342 billion assets under management. Just over half of the respondents came from managers located in the UK, while over one-fifth came from the rest of the EU and around one-quarter from the rest of the world.

Open Europe also received 41 responses from private equity managers primarily based in the UK, representing funds under management of over $204 billion.

Andrew Baker, AIMA’s Chief Executive Officer, said: “We were delighted to work with Open Europe on their survey of alternative investment fund managers in Europe. Their findings prove that our industry makes a strong and tangible contribution to the economies of Europe.”

The report can be downloaded from Open Europe’s website at http://www.openeurope.org.uk/research/aifmd.pdf

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