Limited partners warn EU over regulation

The warning comes in a letter written by the Institutional Limited Partners Association (ILPA), which represents 220 institutional investor groups around the world, to Michael Barnier, EU Commissioner for Internal Markets and Services.

ILPA has warned that the proposed AIFM regulations could close investment opportunities for EU investors in non-EU countries and reduce portfolio diversification, which could result in lower returns and higher risks. The move could also impact on the development of European companies, as the regulations could effectively choke off the billions of dollars of international investment currently flowing into the region from the rest of the world, ILPA warned.  

ILPA wrote, “Private equity is a global business that requires harmonisation and consistency to ensure continued levels of access to global investment opportunities. When managers are restricted as to investor domicile and vice versa, we are concerned that the result will be a harmful one.”

ILPA said that it was supportive in principle of increased transparency measures, but warned that disclosure of sensitive financial information about portfolio companies could hamper the performance of private equity, and discourage publicity-shy private companies from dealing with firms.

Some of the more controversial aspects of the proposed AIFM regulations, such as measures to ban EU investors from investing in non-EU funds, were reintroduced by Spanish regulators after EU presidency rotated to the country. The measures had been removed by previous president Sweden.

ILPA has 220 member organisations in North America, Europe, Australia, New Zealand and the Middle East, spanning the institutional LP spectrum from pension funds to family offices.

Copyright © 2010 AltAssets