Hedge Funds Looking for Ways to Mitigate MiFID II Impact

Two hedge funds opt for the less onerous AIFMD regulations.

Tudor Investment Corp and Brevan Howard Asset Management have dropped their MiFID II licences, as the new rules and regulations are to come into effect in January 2018. The taxing MiFID II regulations are proving difficult for some companies in the financial sector, and hedge funds appear to be the most directly impacted by the incoming regulatory scrutiny.

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As a result both companies have secured their continued operation in London via their Alternative Investment Fund Managers Directive (AIFMD) licenses. The AIFMD regulations, launched in July 2013, are considered by some fund managers to be less burdensome than MiFID II.

Come January 2018, MiFID II will completely overhaul the existing MiFID regulations, increasing transaction and reporting obligations significantly. Compliance with the new regulations is seen as a major challenge.

AIFMD Regulation

AIFMD is a regulatory framework for hedge funds, private equity and other investment trusts. It is built by design to protect investors by increasing the mandatory reporting of information to competent authorities, while minimizing the systematic risk that any companies might pose to the economy. The regulation mandates that funds have robust risk management structures that do not promote excessive risk taking.

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We are seeing a shakeup in the hedge fund industry as far as regulatory practices go – a few years back there wasn’t much regulation, and now the industry feels that regulations are becoming too difficult.

This shakeup is part of a balancing act for the industry, which is attempting to tread the line between too little and too much regulation.




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