The European draft rule to tighten hedge-fund regulations may make it “unduly difficult and onerous” for Singapore-based alternative investment managers to access investors in Europe, according the hedge-fund industry’s largest trade group.

“The latest set of directives, if left unchanged, could significantly detract from the growth of the local alternative investment management industry,” said Michael Coleman, chairman of the Singapore chapter of the Alternative Investment Management Association.

 

The European Parliament’s economic and monetary affairs committee approved this week a measure to force hedge-fund managers outside the EU to agree to transparency standards in exchange for marketing access to investors in the bloc.

 

Hedge funds and private equity firms are under the scrutiny of lawmakers worldwide, who say they are partly to blame for the financial crisis. Singapore’s hedge-fund industry has grown from near zero in 1997 to 138 single-strategy hedge-fund managers that employ more than 800 professionals, according to a survey by the local chapter of AIMA. The industry oversees at least US$34.9 billion ($49 billion), excluding assets managed by several of the large global firms, it said.

 

“The effect of this vote on the directive is highly protectionist,” Coleman said in an e-mailed statement today. “It may have a significant negative impact on the Singapore hedge-fund industry’s ability to access European-based investors. Also, it will make it difficult for European investors to source and invest in the best hedge fund opportunities worldwide, many of which are to be found in Singapore.”

 

The full EU parliament is due in July to give its verdict on the draft legislation, which the U.S. and U.K. have opposed. Final EU approval of any measures requires an accord between the parliament and EU national governments in a process that could take another year or more.