The Alternative Investment Management Association (AIMA), the global representative of hedge fund industry has warned that a flawed Directive on Alternative Investment Fund Managers being pushed by the European Union would have a far wider impact beyond the hedge fund and private equity industries.

The warning comes ahead of two key votes next week on the Directive - in the European Parliament's Economic and Monetary Affairs Committee (ECON) on May 17th and the Economic and Finance Council (ECOFIN) meeting of European finance ministers on May 18th.

Andrew Baker, Chief Executive Officer of AIMA, said: "Of course the hedge fund and private equity industries would be impacted by a flawed Directive, but the consequences would be much wider. We have already heard how the Directive would hit small firms across Europe and make it more difficult for new businesses to be created, and how development banks investing in emerging markets would be affected.

"Real estate and infrastructure investment in Europe would also be impacted because funds in this sector would also be covered by the Directive. We're talking about schools, hospitals, shopping centres, things that affect ordinary EU citizens."

He said the group is concerned about certain proposals, including a ban on European investors

from accessing funds outside the European Union. Major investors in alternative investments include pension funds and insurance companies, and there would be very negative social consequences across Europe if their investments were adversely influenced by such a ban. Ordinary European citizens would have to pay higher pension contributions and insurance premiums.

Baker said that closing Europe's borders would send all the wrong signals out to the rest of the world about Europe 's place both as a global centre for financial services and as a destination for international investment. It would significantly affect international trade and capital flows and result in protectionist consequences. And it would impact ordinary citizens and small businesses across the EU and emerging markets internationally.