Europe against 'strippers'

Another week, another crucial AIFM Directive vote delayed. Adding to GPs’ anxiety is the fact that the longer the process drags on, the more unfavourable amendments seem to be added to the bill, such as one apparently banning ‘asset-stripping’

The EU Parliament’s Economic and Monetary Affairs Committee (ECON) was scheduled to vote on a final version of the Directive for Alternative Investment Fund Managers (AIFM) on Monday, but the vote was delayed at the last minute for legal and procedural reasons.

It turned out that the ECON committee hadn’t completed a necessary reconciliation with a version of the legislation that had been approved by the EU’s legal (JURI) committee on 28 April. The ECON vote is now rescheduled for 17 May.

The JURI committee in turn was first scheduled to vote on the directive at a meeting on 19 April, but that meeting was also delayed as clouds of ash from Icelandic volcano Eyjafjallajokull grounded flights across Europe.

And of course in March, a vote scheduled during a meeting of the EU Economic and Financial Affairs Council was delayed at the eleventh hour following an intervention by then UK prime minister Gordon Brown.

The AIFM Directive has been terrorising the European private equity community for nearly seven months now. And the longer the AIFM directive is debated, the worse it seems to get for private equity. During the Swedish EU presidency, the punitive “third country” rules – which to the alternative investment fund industry are regarded as the most harmful part of the directive – were removed. But the Spanish presidency saw those put back in.

In November, Sweden moved curb compensation for hedge fund and private equity managers by up to 60 percent in some cases. And a few weeks later, an amendment was added to require all fund managers to comply with the regulations, rather than just those over a certain AUM threshold.

Lest GPs think that the directive is as bad as it could possibly get, there is now word circulating in legal circles that the latest version includes a section that would impose restrictions on “asset-stripping” at companies bought by private equity firms. One UK law firm said at press time that it was still working to get clarity on what “asset-stripping” might mean.

As the weeks drag by, private equity and private equity real estate’s position in Europe looks more and more precarious. Here’s hoping that the rules are firmed up sooner rather than later.

As the harshest regulator of all – Darth Vader – once said: “I am altering the deal. Pray I don't alter it any further.”