The European Commission's draft directive on hedge fund regulation is potentially ambiguous and needs to be rewritten, according to the Alternative Investment Management Association (AIMA).

"The particular problem with the draft directive â?¦ is that it is written in such an unclear way that it is open to ambiguous interpretation," said AIMA. Implementation in its current form could prove to be unworkable. It also appears to be in conflict with existing financial services directives."

The AIMA represents more than 1,200 hedge fund firms worldwide.

The industry group has already attacked the EU's regulatory drive and said last month it was frustrated by the "baffling" volume of political rhetoric relating to hedge funds.

The AIMA said it would oppose all measures it believes would be punitive, would reduce competitiveness and would increase unemployment. "It is extraordinary that at a time of economic crisis the Commission is contemplating putting jobs at risk and hitting investors and thus investment. Much of the directive is unnecessary and by creating an extra layer of bureaucracy imposes significant burdens and costs without adding value."