The Effects of Adoption of Directive ISA Part.III

This framework has become particularly important for investors after the crisis. Indeed, many people who keep a bitter taste for excessively long periods of redemption given by some hedge funds, sometimes by breaking the terms of liquidity initially set. However, the entry of this new type of management strategies in a world hitherto occupied by standardized strategies and has known the risk of blurring the recognition gained by the UCITS label. Alternative strategies in place may pose risks not previously present in UCITS funds, including through use of complex derivatives. When using these instruments has been expanded with the publication in March 2007 of the Directive on eligible assets for UCITS III funds in the funds market Newcits was much narrower. For this reason, the introduction of funds from investors Newcits unskilled, which by definition cannot lead themselves a thorough due diligence on their investments, will likely require a level of information about the risks higher. The principles of Markets in Financial Instruments Directive should nevertheless partly to help distribute these products exclusively to European investors who understand.

The adoption of the Directive ISA has significant effects. By imposing new constraints on the personnel of hedge funds, it sets up very restrictive measures that will harm may be a first step in managing European alternative. But the whole directive, which provides greater transparency, hedge funds could boost the long term. Development funds for its Newcits represent a significant change in the landscape management. But the UCITS label must remain strong and its reputation and why the danger posed by the funds must be Newcits of attention. In fact behind the possibility of allowing individual investors in Europe to access a range of wider product, allowing them to diversify their investments, hides a real risk of cannibalization of the label. However, the readability of UCITS is a major asset for marketing to international investors. It is likely that the industry will look closely at this intrusion of hedge funds that can really tarnish the image of the dearly bought by European management.

The Effects of Adoption of Directive ISA Part.II

The novelty is real alternative for players, but already partially implemented by many of the banks after 2008 under pressure from governments. Part 3 on the CRD remuneration’s extension is to hedge funds relatively quick. A substantial increase in the fixed part is to provide for categories of personnel involved in hedge funds, like what the investment banks have made since 2009 in anticipation of regulatory restrictions bonuses.

In the market for asset management, anticipation of the adoption of the directive has had the effect of fostering the development of a new type of funds, qualified by the industry "Newcits. These funds are in place alternative management strategies usually developed by hedge funds in the regulatory framework.

The combination of an uncertain legal environment and the ability to raise funds from a new segment of investors, have decided the alternative managers to develop their strategy through UCITS vehicles. The entry into force of the UCITS IV Directive in July 2011, and the possibility for UCITS to receive a European passport for marketing in the EU could also weigh in the choice. This enthusiasm is reflected in the numbers: between September 2008 and May 2010 the number of funds Newcits almost doubled, from 270 to 520 funds and assets under administration from 45 to nearly 90 billion Euros.

Symbolizing the development of this type of fund, the index "Ucits HFX Index" to track the overall performance of these funds, was launched in February 2010. In view of investors, this new category of funds has some attractive compared to traditional hedge funds: diversification, leverage, valuation and liquidity are strictly supervised.

The Effects of Adoption of Directive ISA Part.I

Recently adopted by the European Parliament, the directive will come into force ISA in January 2011. All decisions taken under the ISA is a turning point for the industry of hedge funds because of restrictions imposed.


The national authorities of EU countries have a period of two years to transcribe those rules in their legislation, particularly on the issue of the European passport. However there is already fairly immediate impact in some areas. This is particularly the case for compensation in hedge funds and development of a new market, the UCITS alternative points on which we intend to return.


The compensation of hedge funds is generally of the type "2 / 20," that is to say 2% management fee and 20% of the outperformance retained by the manager. In terms of compensation, important work had already been conducted during the update of the directive regulating the implementation of Basel II (CRD 3 - Capital Requirements Directive - adopted by the European Parliament in July 2010). Its conclusions were largely contained in the Directive ISA. The main change is to align the distribution of salaries on the level of risk and lifecycle funds managed, and this with special attention on the variable. It found that 40% to 60% (depending on its size) of the bonus will be deferred over a period of 3 to 5 years and at least 50% should be distributed in shares themselves kept for a minimum period. Thus, for a variable compensation of € 100 K, a maximum of € 30k will be paid in cash the first year. Moreover, in case of negative performance of the fund, the amounts paid by the fund to employees may be partially recovered through mechanisms of penalty. The directive was not set up a ratio between the fixed and variable, merely specify that the two must be balanced, and fixed high enough to allow the non-payment of a variable, which guarantee payment is now banned. Because of work already conducted in CRD 3, Directive already provides a great level of detail through an appendix describing the new remuneration arrangements.