Andrew Baker, chief executive of Aima, says: 'This is an estimated figure but it shows the potentially enormous impact that the directive could have on Europe's pension funds and in the longer term, Europe's pensioners.

'European pension funds have been increasing their allocations to alternatives over recent years because of the good returns, lower correlations with traditional asset classes and low volatility they provide. With Europe facing strong demographic pressures as a result of an ageing population, pension funds will need strong growth and reliable returns over the coming years in order to meet future demand.  If they suffer lower returns as a result of the directive, it's not only Europe's pensions funds but Europe's pensioners of both today and tomorrow who will suffer.'
 
Baker says the directive will result in a major reduction in choice for Europe's institutional investors and a big increase in costs and hence a significant reduction in returns.
 
Aima produced the estimated figure based on the estimated assets under management of the European pension fund industry, the estimated allocation to alternative investments by European pension funds, and the estimated reduction in returns they could face if the directive went through in its current form.