Nearly three-quarters (72 per cent) of fund managers view the Alternative Investment Fund Managers Directive as a business threat, according to a survey carried out by Deloitte.

The biggest concerns for fund managers are depositary costs (84 per cent), delegation (78 per cent), changes to contractual arrangements and routes to market (67 per cent). Collectively these reduce the attractiveness of Europe as a place to do business.

Smaller managers, private equity and real estate are more likely to see AIFMD as a business threat. Those companies that regard AIFMD as an opportunity manage at least GBP1bn of assets.

Stuart Opp, lead investment partner at Deloitte, says: “Managers are facing significant organisational and operational change under AIFMD with far-reaching business consequences. The cost of doing business in Europe is set to rise disproportionately for smaller managers who have less internal resources to deal with the compliance responsibilities. There will clearly be a trade-off for managers to consider in determining their approach to AIFMD and managers will respond differently, depending on their distribution strategy and client profile.

“The survey shows that AIFMD will increase transparency for investors. More than half of respondents (53 per cent) plan to provide investors with additional information as a result of AIFMD’s regulatory reporting requirements. However, increased transparency and investor protection will be counterbalanced by less choice and competition in the market, increased expense ratios, confusion over leverage figures and longer redemption terms in some cases.

“Given the widespread concerns with the directive, it comes as no surprise that a sizeable majority of respondents view AIFMD as a business threat. The depositary, marketing and remuneration rules required under AIFMD will have significant business impacts on fund managers.”

Deloitte surveyed 23 hedge, private equity and real estate fund managers collectively managing GBP175bn of assets.

The AIFMD came into force in July 2011. It regulates how alternative investment fund managers distribute their funds and operate their business. An implementing regulation from the European Commission is expected in September 2012.