MiFID II – Hedge Funds start to abandon in favour of AIMFD

Two of the world’s largest hedge fund companies have dropped their Mifid licences. The move will enable the investment managers to avoid controversial new rules that will radically transform how Europe’s financial industry operates next year.

The UK arm of Tudor Investment, the hedge fund company founded nearly 30 years ago by Paul Tudor Jones, the 62-year-old billionaire, dropped its Mifid licence in June, according to a regulatory filing.

 

The changes have come months before the arrival of MiFID II directive, which will force fund managers, banks and brokerages to overhaul their business models and hand over vast sets of data to regulators.

The hedge fund companies have instead secured Alternative Investment Fund Manager licences (AIMFD), which have enabled asset management companies to market hedge funds to investors across the continent since 2013.

These licences also carry onerous requirements, including tough restrictions on pay for fund managers, but some asset managers view these as less challenging than the new MiFID II rules.

Under the AIFM directive, hedge funds are required to carry out transaction reporting, but not to the same extent as firms regulated under MiFID II.

Hedge funds are acutely concerned about the reporting requirements under MiFID II, which will involve sending lengthy reports to regulators within minutes of trades being placed, detailing how they were executed.

There are also widespread fears in the hedge fund industry about the impact of European regulators’ attempts to make payments for analyst research more transparent. From January, fund managers affected by MiFID II will no longer be able to receive analyst reports for free in return for placing trades with banks and brokerages, dealing a blow to investment groups with small research budgets.

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