A group of London’s largest hedge funds, which between them manage £120 billion of assets, have joined forces to fight a proposed European directive on financial regulation.

This is the first time the secretive investment community has taken such a public stand. They say that if the directive is introduced it will have a devastating impact.

Black Rock, Brevan Howard, CQS, DE Shaw, Fauchier Partners, Lansdowne Partners, Man Group and Marshall Wace have set up a steering committee to campaign against the new rules. It is led by the Alternative Investment Management Association (AIMA), the industry trade body.

Brevan Howard, Europe’s largest hedge fund with £14 billion of assets under management, said it would be forced to leave Britain if the directive was not changed.

James Vernon, one of the firm’s founding partners and chief operating officer, said: “The directive envisages setting leverage [borrowing] limits and that wouldn’t just make it difficult for us to run our business, it would make it impossible.

“We are actively looking at non-EU locations. Singapore, Hong Kong, New York and the Middle East are all possibilities.”

London’s hedge funds make up 80% of the European industry. They accept the need for greater transparency but think that some elements of the draft proposals will be unworkable, such as restrictions on debt, and a proposal that only firms domiciled in Europe can market to EU investors.

The committee will make its case to politicians in Westminster, Brussels and other European capitals during a two-year consultation period.

Andrew Baker, AIMA chief executive, said: “We want to mobilise as much of the industry as we can.”

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