European institutional investors face billions in lost annual returns if new EU rules for hedge funds and private equity firms are approved, according to a study commissioned by the Financial Services Authority, the UK’s market regulator.

The findings are the first formal – and independent – impact assessment of the directive from an EU member state authority, and are expected to add considerable heft to efforts from several European countries, led by the UK, to amend the European Commission’s draft alternative investment fund manager directive in the coming months.