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And now, for once some good news on the regulatory front. Whisper it softly, but it looks as though a consensus might be building for a rethink of the European Union's Directive on Alternative Investment fund Managers, which so appalled whole swathes of the alternative investment industry when the first draft was published by the European Commission at the end of April.

Make no mistake, the spectre of regulation is not going to go away on either side of the Atlantic. But at least there are signs that influential European policy-makers may be ready to talk about an approach to supervision that does not look so much like a calculated punishment of the sector for its supposed role in the financial meltdown of the past two years.

It is one thing for British ministers to complain about the draft directive; as everyone knows, the UK has most to lose from any measure that constricts the industry or encourages it to move outside the EU. It's another for the industry to receive conciliatory words from the Swedish presidency of the EU, a country not previously known to be soft on hedge funds and their managers.

June's European Parliament elections have also done the industry a favour, weakening the power of the Socialist group that was most active in driving the legislation, and strengthening parties with a more judicious stance on the right balance between regulation and investment and marketing freedom.

A member from the UK's centrist Liberal Democratic Party, Sharon Bowles (pictured), has taken over as chairwoman of the parliament's economic and monetary affairs committee from French Socialist MEP Pervenche Beres, and she has already promised a fresh look at a draft that threatened European institutional investors with "excommunication" from global capital markets.

Telling the Financial Times that the pressure on the Commission to come up with proposals had created a risk of unintended consequences, Bowles said: "Now we have to fix bits to make it workable." However, she also said that enough had been heard from the industry about the problems with the draft, saying: "The UK hedge fund mood music just puts people's backs up."

How much better, she says, if the arguments for changes to the directive could be made by those who should be in the best position to assess the potential damage from a hastily-drafted piece of legislation, the institutional investors.

A pension fund arguing that ill-considered constraints on hedge funds and other alternative vehicles could in the long term damage the retirement income of its members by denying them access to high-alpha managers and the full benefits of diversification would surely receive a more attentive ear than managers threatening that any attempt to increase transparency will see them off to Geneva.

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