Many fund managers based outside the EU (42%) do not plan to raise capital from European investors in the near future, with 59% of this group avoiding the region due to concerns about the AIFMD, according to Preqin.

The Alternative Investment Fund Managers Directive (AIFMD), the European Union (EU) regulation introduced to harmonize regulatory standards across all alternative investment managers across the economic region, has been the topic of much debate since it was first approved in 2011.

The introduction of the AIFMD has made the process of raising capital in Europe more complex, particularly for non-European hedge fund managers.

The cost of compliance remains the single largest difficulty for managers, with 42% citing this as their primary concern about the directive.

Amy Bensted, Head of Hedge Fund Products at Preqin, said: “The leading concern hedge fund managers have about the new regulation is the increased costs of complying with the EU directive, with two thirds of those managers that have acquired the passport stating the costs have been higher than they originally expected.”

Many managers based outside the EU are relying on investors to approach them through reverse solicitation, said Preqin.

Preqin’s latest survey of global hedge fund managers reveals that outside Europe, attitudes towards the AIFMD remain largely skeptical, with 35% of managers based in the US and 33% of managers based in Asia & ROW (rest of world) feeling that the AIFMD would have a negative impact on their firm over the next 12 months.

In contrast, Europe-based fund managers (excl. UK) were the most supportive, with 55% of European fund managers surveyed believing that the directive will have a positive impact on their firm over the next 12 months and only 9% believing it will have a negative impact.

Bensted said: “While general negativity towards the regulation has fallen over the past six months, 45% of fund managers still believe the AIFMD will change the industry for the worse, and only 23% feel it will have a positive impact. Although in Europe most hedge funds are AIFMD-compliant, only a relatively small number of fund managers from beyond the EU’s borders have acquired compliance status.”

According to the findings, only 15% of US hedge fund managers, and a quarter of firms across Asia and rest of world (ROW), are currently compliant with the AIFMD.

This compares with almost all (90%) of UK-based firms, and 82% of fund managers across the rest of Europe.

“Despite having one of the highest levels of compliance (90%), not a single UK-based fund manager felt the directive will have a positive impact on their business. Many non-EU fund managers are choosing to avoid investment from the region completely, which may result in a reduced choice of funds available for investment for EU-based investors,” she said.

The fund managers that participated in the Preqin survey represent $225bn in assets under management (AUM) and are located across the globe.