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Emerging Markets Private Equity Association calls for rethink of alternatives directive

The Emerging Markets Private Equity Association has advised members of the European Parliament to vote with caution when adopting proposals on third country arrangements of the draft Alternative Investment Fund Managers Directive on 27 April. 

The association says the outcome of this vote will seriously affect economic development in emerging economies. 

EMPEA also requests that the directive be amended to allow emerging market fund managers to market their funds in the EU under a regime similar to the private placement one now in place.

Citing new research data from the latest EMPEA/Coller Capital Emerging Markets Private Equity Survey, the association has appealed to MEPs to strongly consider voting against the AIFM Directive in its current form.

It says if the current form is adopted it will cause alternative investment funds in developing countries to lose access to funding from the EU market; and cause EU investors, including EU member development banks, to be limited in their ability to promote private sector growth in the world’s poorest countries.

Sarah Alexander (pictured), president and chief executive of EMPEA, says: “April 27 could well be remembered as the day Europeans undermined both their best tool for alleviating poverty in developing countries and the best chance they have of re-filling pension fund coffers depleted after the financial crisis.”

The results of the EMPEA/Coller Capital Emerging Markets Private Equity Survey reveal that over half of limited partners currently invested in emerging markets private equity intend to accelerate their new commitments over the next two years. Total commitments to emerging markets private equity funds are expected to rise from six to ten per cent today to 11 to 15 per cent in two years’ time.

Investors are attracted to markets with strong underlying growth rates but private equity investment is also a critical driver of economic growth and job creation in developing countries.

Since 2005, such funds have raised more than USD200bn for targeted investments into developing countries, providing a crucial source of capital for businesses in markets where private capital is very difficult to access.

According to EMPEA, all of these factors are likely to be damaged by specific provisions in the AIFM Directive’s current form which would greatly restrict the possibilities for alternative investment funds to be marketed in member states by fund managers based in emerging markets.

The third country and equivalency provisions contained in the draft directive would make it either legally impossible or cost-prohibitive for emerging markets fund managers to raise capital in various EU markets, jeopardising their ability to raise sufficient funds for investment and therefore to be viable as going concerns.

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