LONDON (Reuters) – The European Union said on Thursday it has reached a deal on revising its rules for managers of hedge funds and other alternative investments, easing industry fears of a post-Brexit crackdown on managers in London.

Representatives of EU states and the European Parliament reached the deal overnight to update the bloc’s Alternative Investment Fund Managers Directive (AIFMD) rules that cover investments in hedge funds, private equity, private debt funds and real estate funds.

The agreement, which seeks to make it easier to invest in a broader range of assets to boost the EU economy, needs formal rubber-stamping by parliament and member states.

The European Commission proposed changes to AIFMD and to the Directive on Undertaking for Collective Investment in Transferable Securities (UCITS) – traditional funds that invest in stocks and bonds – in November 2021.

Under the agreement, European asset managers will have to disclose more details to regulators about their investments with private funds in the United States, Britain and other non-EU countries.

But it stops short of toughening up “delegation” rules for managers outside the EU that pick assets for funds listed in the bloc. London-based managers run many funds listed in Luxembourg and Dublin, and had been worried this could become harder after Brexit.

The agreement includes new rules on funds that issue new loans, including higher requirements to keep money aside to cope with liquidity demands in stressed markets. It sets out how many of these loans must be kept by the company that originates them.

New limits on how much leverage, or debt levels these funds, which issue loans, can hold will be set in the final legislation.

The agreement protects European investors in that it would not limit access to “global expertise,” said Taggart Davis, head of EU government affairs from the lobbyist group the Managed Funds Association in a statement on Thursday.

“While we are supportive of the overall framework, we are concerned about the impact of leverage limits on loan origination funds,” said Davis.

Jiri Krol, global head of government affairs at the Alternative Investment Management Association, another private markets lobby group, said AIMA welcomed many of the rules which offered members greater certainty about working in Europe, but raised concerns about the leverage limits on loan funds.

Deborah Zurkow, Chair of the Alternative Credit Council and global head of investments at Allianz Global Investors, agreed.

“Private credit funds provide vital finance and liquidity to EU businesses helping them to invest, grow and create jobs across the continent. While some of the reforms introduced will support that activity, others will act as a brake,” she said.

(Reporting by Nell Mackenzie; editing by Huw Jones, Dhara Ranasinghe and Sharon Singleton)

Canary Wharf, part of the financial district at dawn in London, Britain, February 15, 2023. REUTERS/Peter Cziborra/File Photo