The Swedish Government, holder of the European Union's six-month rotating presidency, has proposed removing a general limit on hedge funds' leverage, one of the three most contentious issues that are currently drafted in the EU's directive on alternative investment fund managers.

A copy of the Swedes' proposed redrafting, submitted yesterday and obtained by Financial News, strikes out the original proposal, which would allow the European Commission to impose permanent limits on the level of leverage that managers could use.