By Huw Jones and Laurence Fletcher
LONDON, Sept 11 (Reuters) - A draft European Union law to regulate the managers of hedge funds and other alternative investment funds may be strengthened despite fierce opposition from Britain and industry, a senior EU lawmaker said on Friday.
The bloc's governments and the European Parliament have joint say on the measure which is part of wider EU and global efforts to learn from the crisis by shining a light and directly supervising all parts of the financial system.
Britain wants the rules diluted, saying they go too far and would damage the industry and Europe but Poul Nyrup Rasmussen, president of the EU assembly's socialist bloc, the second largest grouping after the centre right, was confident that some changes will make aspects tougher.
At a debate in London in which Rasmussen's arguments were often attacked by British financial services minister Paul Myners and hedge fund figures, the Dane said capital rules may be toughened and the funds themselves brought under the scope of the directive.
"I see changes on the capital requirements side -- there needs to be a strengthening up of the capital requirements -- and I see changes on the precise description of transparency," Rasmussen told reporters on the sidelines of a debate hosted by think tank Open Europe.
"I see changes on ensuring that the funds are covered also with the managers and we need to solve the problems of the offshore fund managers," the former Danish prime minister said, adding that such a move could mean Cayman-domiciled hedge funds would have to move onshore to be sold to EU investors.
He would also seek to make the rules reflect diversity in the sector better and push for lower threshold levels so that more managers come under the scope of the new rules.
As drafted, the thresholds for inclusion are 100 million euros of assets under management for hedge funds and 500 million euros of funds for private equity groups.
"The threshold today is much too high. You don't need to be a superduper professional fund manager to create a solution and come below," Rasmussen said after the debate.
One top hedge fund executive, who declined to be named in order to speak candidly, told Reuters he was "discouraged" by Rasmussen's comments.
The executive said suggestions by the Dane that smaller funds should be included under the new rules -- to stop larger funds splitting and thereby slipping under the radar -- showed he was "unconnected with the reality of asset management".
"ILL CONSIDERED"
Britain faces heavyweight opposition to diluting the rules.
France wants stronger rules and Germany has also backed the need for tough regulation. Elena Salgado, the economy minister for Spain which takes up the EU presidency next January, told the UK Guardian newspaper she backed the draft measure.
In a bid to head of UK complaints that no proper impact assessment has been done, Rasmussen said parliament will hold hearings. Paul Myners, a British financial services ministers, told the debate it was clear Rasmussen had already reached his conclusion.
However, hedge fund industry body the Alternative Investment Management Association and the European Private Equity and Venture Capital Association welcomed Rasmussen's comments that the wider impact of the directive would be assessed.
Much of the world's $1.4 trillion hedge fund management industry is based in New York and London and the UK is also Europe's most important private equity centre.
Myners called the measure "protectionist", saying that hedge funds and private equity were not central to the financial crisis, and that the "ill considered and one size fits all" measure "tilts at mythical windmills".
"I am confident we can secure significant improvements to this directive," Myners said.
Myners said the hedge fund industry were being very effective in their campaign to dilute the measure but that the private equity sector needed to raise its game.
The rules would also "shackle" industry a time when investment was needed to revive economies and would bring no outward benefit to investors, said Jonathan Russell, a managing partner at UK-based private equity group 3i.
(Reporting by Huw Jones and Laurence Fletcher, editing by Ron Askew)