When procrastination and over-thinking collide
By Paul Mackintosh - 23/09/13
The EU has not been renowned for attracting great headlines lately, so it seems Jon Moulton, chairman of UK private equity fund Better Capital, has decided to pile in. Speaking at the Australian Private Equity and Venture Capital Association’s Alpha 2013 conference in Australia, he declared that “the EU produces meaningless, absolutely unreasonable junk in vast quantities and shoves it down the throats of the industry,” and lambasted the Alternative Investment Fund Managers Directive (AIFMD) as “written in a language of its own, makes no sense, is pure overhead for the industry and it's going to be a real pain.”
Mr. Moulton is a former managing partner of Alchemy, and previously worked with Citicorp Venture Capital, Permira and Apax, and speaks from a position of considerable experience in the private equity industry. All the same, you have to wonder how objective his assessment is when he immediately follows up his critique of the AIFMD by saying that: “we need to get out of the EU … which is absolutely intent on wrecking our economy.”
Brits have been known to let the sun, sea and sand of the Lucky Country’s wide open spaces go to their heads, and I doubt that Mr. Moulton has done his own concerns against the AIFMD any good by linking them with Nigel Farage-style EU-bashing.
But is the AIFMD that bad? A 2012 Deloitte survey of hedge fund and private equity managers did conclude that the overwhelming majority of UK respondents believed it to be a direct threat to their business – although the UK bias, as in Mr. Moulton’s case, is significant. Anglo Saxon attitudes are just not the same as continental European ones, and affinity to a lightly regulated environment can go hand-in-hand there with straight Europhobia.
Some other industry participants are claiming that over time the new regime may offer alternative funds access to capital sources they have been unable to tap before – though I suspect that most managers would pick lower management and compliance costs today over unspecified capital access opportunities at some vague point in the future any day.
But Mr. Moulton’s diatribe does point to one potential problem with the whole AIFMD scheme. Conceived by a frankly hostile European socialist cabal under Denmark’s Poul Nyrup Rasmussen, who talked frankly of the “fierce lobbying” it faced and readily conflated private equity with the “shadow banking sector,” the AIFMD was touted as a response to a non-problem – the supposed complicity of hedge funds and private equity in the 2008 GFC – by a European political class that has since covered itself with shame in the aftermath of the sovereign debt crisis. It’s hard to imagine them being able to do the same in today’s climate of opinion. Lobbied and tweaked for years, the AIFMD might have ended up as not pernicious, but simply unworkable.