The Alternative Investment Management Association is siding with the U.K. on more lenient rules for hedge funds, private equity and other alternative investments, warning that the proposed regulations in the Alternative Investment Funds Directive  “would hit fund managers and investors around the world” by making it difficult for them to access the European Union market.

By essentially locking other hedge funds out of the EU market, AIMA said, the rules would be protectionist, reducing choices for investors, increasing costs and, thus, lowering returns.

Thus, said Andrew Baker, CEO of AIMA, the proposed laws would “weaken the competitiveness of the EU in investment management and make the EU a less attractive destination for international investment.”

The directive would limit the amount of debt and leverage a hedge fund takes on, require them to hold capital to meet redemptions and impose strict disclosure requirements on private equity portfolios. By comparison, the U.S. government is only looking for hedge funds to register and provide more information.

Separately, U.S. Treasury officials reportedly have been speaking with regulators in Europe to try and convince them to rethink the regulations that would require non-U.S. hedge funds to meet EU standards. Germany and France have been leading the charge to overhaul hedge fund regulations in the wake of the financial crisis.

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