29 July 2009

FT: Draft EU hedge fund rules to be revised

Sharon Bowles said European pension funds and institutional investors faced “excommunication” from global capital markets if the draft directive on alternative investment funds was implemented unchanged.

Controversial draft regulations for hedge funds will be substantially amended, the new head of the European parliament’s economic and monetary affairs committee has told the Financial Times.

Sharon Bowles, British MEP and new chair of the committee, said European pension funds and institutional investors faced “excommunication” from global capital markets if the draft directive on alternative investment funds was implemented unchanged.

The proposals, drawn up amid public and political anger over the risks taken by some financial institutions that led to the crisis, would require alternative fund managers, rather than funds themselves, to register and seek authorization for the first time. Fund managers would also have to meet reporting, governance and risk management standards, including minimum capital requirements.

They have drawn the ire of hedge funds around the globe and financial centres such as the City of London.

Ms Bowles said there had been “enormous pressure on the Commission to come forward with measures that inspire public confidence”.

There was a risk of “unintended consequences” to the draft directive. “Now we have to fix bits to make it workable,” she said.

But she warned the hedge fund industry against posturing. “The UK hedge fund mood music just puts people’s backs up,” she said.

“The directive is not only about hedge funds and private equity – it covers everything in between,” she said, adding that mainstream investors needed to “make themselves heard”.

Press release

 

© Financial Times