Emerging Markets Private Equity Association Calls for Rethink of EU Alternative Investment Fund Managers Directive in Light of New Data

WASHINGTON D.C., April 20, 2010 /PRNewswire/ -- EMPEA (http://www.empea.net/) , the Emerging Markets Private Equity Association, has strongly advised Members of the European Parliament (MEPs) to vote with caution when adopting proposals on third country arrangements of the draft Alternative Investment Fund Managers ("AIFM") Directive on 27th April. 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 ( http://www.empea.net/Main-Menu-Category/Member-Links/Just-Released-2010-EMPEA Coller-Capital-EM-PE-Survey-of-Investors-.aspx), the non-profit, independent global industry association appealed to MEPs to strongly consider voting against the AIFM Directive in its current form, which if adopted, will cause Alternative Investment Funds ('AIFs') 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.

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Appealing to the MEPs, Sarah Alexander, President and CEO of EMPEA said: "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; and that total commitments to emerging markets private equity funds are expected to rise from 6-10% today to 11-15% 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 US$200 billion for targeted investments into developing countries, providing a crucial source of capital for businesses in markets where private capital is very difficult to access. 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 AIFs 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, jeopardizing their ability to raise sufficient funds for investment and therefore to be viable as going concerns.

EMPEA's understanding is that the aim of the Directive is protection against systemic risk. It submits that there is no systemic risk presented by such funds, and cannot understand why the EU would seek to prohibit funds managed by Emerging Markets Fund Managers from seeking investors or making presentations in the EU. At a minimum, the managers of such funds should be in a position to lawfully respond to inquiries from EU investors.

Therefore, on behalf of its members, EMPEA is registering its concerns about the negative impact the draft Directive will have on this important source of development capital and 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.

EMPEA estimates that more than 90% of its fund manager members currently either market their funds to, or have as investors, entities from within the European Union. 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, jeopardizing their ability to raise sufficient funds for investment and therefore to be viable as going concerns.

Indeed, such arrangements are likely to either force those Emerging Markets Fund Managers to cease soliciting investors in the EU or, for those who are able, force them to relocate their management activity from the least developed economies to those which are more developed, thereby undermining the growth of nascent fund management industries in such economies.

Notes to Editors:

EMPEA (http://www.empea.net/) is a non-profit, independent, global industry association whose mission is to promote the development of private equity and venture capital investment in the emerging markets of Africa, Asia, Europe, Latin America and the Middle East. EMPEA represents 280 fund managers and institutional investors headquartered in more than 40 developing countries, and its membership includes the most active European development banks that invest in private equity funds in developing markets.

The EMPEA and Coller Capital Survey is available to download from the EMPEA and Coller Capital websites at: http://www.empea.net and http://www.collercapital.com.

    For more information, please contact:
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SOURCE EMPEA