Money management industry associations criticized a recommendation by the European Securities and Markets Authority not to grant U.S. managers an extension of a passport to market alternative investment funds in European Union countries.
The ESMA published Thursday its advice to the European Commission, European Parliament, and European Council on whether to apply the Alternative Investment Fund Managers Directive passport to non-European Union alternatives managers within certain countries.
ESMA assessed the U.S., Guernsey, Hong Kong, Jersey, Singapore and Switzerland for the passport. Under the advice, only Guernsey, Jersey and Switzerland would receive the passport.
In its advice, ESMA said that in offering the passport to the U.S., “there is the risk of an unlevel playing field between EU and non-EU (alternative investment fund managers) as regards market access.” ESMA said a more favorable regime exists in the U.S. for the marketing of funds that are domiciled in other jurisdictions, such as Canada.
Further, the authority said that while reporting obligations for U.S. managers are “extensive,” they differ from the requirements under the AIFMD.
The Investment Company Institute, whose U.S. fund members manage a total $18.2 trillion, said the report confuses retail and professional investor regulation.
“ESMA’s advice inappropriately confuses the regulation of mutual funds with the regulation of funds sold to professional investors in the United States,” said Paul Schott Stevens, CEO and president at the ICI, in a statement. “The issue before ESMA is the sale of funds to professional investors across the European Union. Currently in the United States, EU managers can readily sell funds to professional investors on the same terms as U.S. managers, and across the entire U.S. marketplace. Unfortunately, the impact of ESMA’s advice would be to discriminate against U.S. managers by denying them comparable access to the entire EU marketplace.”
The Alternative Investment Management Association, which represents the global hedge fund industry, welcomed the move to extend the marketing passport to managers, but said faster progress needs to be made. It questioned the open-ended nature of the process in relation to the U.S.
“Managers outside the EU should be able to take advantage of the passport, especially if they will get authorized and be supervised by EU regulators, just as those inside the EU are already able to,” said Jack Inglis, CEO at AIMA, in a statement.