New EU fund directive may hit RE vehicles, boost costs-PwC

A new European Union investment fund directive could impose radical changes on the way real estate and alternative asset funds are managed, and increase costs, says the global consultancy and accountanting group PricewaterhouseCoopers. Among other things, it may impose caps on leverage, disadvantage private equity managers, and limit investor choice. The directive, proposed by the EU on 30 April, will catch managers of hedge funds, private equity funds, commodity funds and other institutional funds but also real estate funds, PwC said in a note. Currently it only addresses institutional funds, but could be extended to retail in the same or modified form. The e100m AUM threshold is very low for leveraged real estate vehicles and applies across an aggregation of all funds a manager is running - which means virtually universal application to professionally-managed RE funds. The directive is far reaching and may result in a level of regulation comparable to the strictly supervised regimes of Germany, Luxembourg or French OPCIs, affecting low-regulation partnership regimes around the EU. The themes include governance, manager authorisation, disclosure, risk management, involvement of credit institutions as depositary, and valuation guidance. (Full story to appear in PFE 121 published on 18 May)