LONDON, July 21 (Reuters) - A draft European Union law that will require hedge fund managers to be authorised needs refining to cover other types of alternative investments better, a senior EU lawmaker said on Tuesday.
The Alternative Investment Fund Managers law is before the European Parliament and EU states for adoption, but is already subject to heated debate.
It covers many types of investments that do not come under the EU's long-standing mutual funds framework known as UCITS.
Europe's hedge fund capital Britain is lobbying to dilute parts of the proposal, saying they can't be directly blamed for the credit crunch and that without changes, it could prompt hedge fund managers to exit the EU.
France, however, says the measure needs to be tougher and can't be adopted in its current form.
Sharon Bowles, a British Liberal Democrat member of the EU assembly, has just been elected chair of parliament's influential economic and monetary affairs committee.
It will be key to finding a compromise with parliament and with EU states if the measure is to reach the statute book.
Bowles said other types of alternative funds were only now waking up to the fact the draft law will apply to them as well and not just to hedge funds and private equity.
"It's very difficult to provide the proper continuum of what kind of capital do you need for all the different extremes," she told Reuters Television.
"We will have to have a look at quite a lot of the articles and say does this really only apply to hedge funds and to private equity and how can we deal with the range between," Bowles said.
She did not elaborate on what changes are needed.
"There are those who love to hate both hedge funds and private equity and will want, if you like, to screw them down further because they think that plays well to the country and to the wider electorate," Bowles added.
Europe is facing an ageing population and pension shortfall and therefore there is a need for alternative investments to provide yield, she said.
There is strong pressure from EU leaders to cut a deal on the hedge fund measure quickly as part of efforts to regulate all sections of the financial markets.
The United States is also looking at a similar measure, though the industry says it is not as far reaching.
A first reading vote on the draft law in December was possible but February or March is more realistic, Bowles said.
If there is no joint deal between parliament and EU states at first reading, the measure continues to a second reading, adding several months to the process. (Reporting by Huw Jones, editing by Rupert Winchester)