Alternative investment funds from Canada, Guernsey, Japan,Jersey, Switzerland, Hong Kong and Singapore should be allowed to offer theirservices in the EU using financial passports, the European Securities andMarkets Authority said in advice published July 19.

Australian funds could also gain access to passports,provided that the Australian Securities and Investment Committee extends classorder relief to all EU member states, ESMA said, concluding its of the application of theEU alternative investment fund managers directive passport, or AIFMD, to non-EUinvestment funds and investment fund managers in 12 locations.

As to the potential extension of passports to U.S. funds,ESMA said there is no significant obstacle for funds marketed by managers toprofessional investors that do not involve any public offering but added thatif public offerings are involved, such a move "risks an un-level playingfield between EU and non-EU alternative investment fund managers." Theregulator called on EU institutions to consider options to mitigate the risk.

ESMA said it could not provide a definitive suggestionregarding investor protection and effectiveness of enforcement in Bermuda andthe Cayman Islands. In the case of the Isle of Man, ESMA found that the absenceof an AIFMD-like regime "makes it difficult to assess whether the investorprotection criterion is met."

ESMA first released its advice on the passport's extension to Guernsey, HongKong, Jersey, Switzerland, Singapore and the U.S. in July 2015 and laterexpanded the reviewto add six more jurisdictions.

Alternative investment funds include hedge funds, venturecapital and private equity funds and real estate funds.