Money managers under the microscope
…Or maybe not
Yesterday I optimistically predicted hedge funds would learn a lot more about their regulatory fate as the G20 drew to a close.
That wasn’t exactly incorrect — the industry did find out for example that regulation and oversight will be extended to “systemically important hedge funds”.
But, as with many political statements, the devil is in the detail — or in this case, the lack of it.
“The G20 communiqué is unclear as to whether their aim is to have further regulation and oversight of the funds themselves or of the managers who manage the funds,” says Robert Mellor, UK hedge fund leader at PricewaterhouseCoopers.
“The communiqué also does not make it clear what regulation means in this context. If indeed they are pointing to more regulatory capital, who would be required to have the additional capital? The hedge fund manager or the offshore fund?”
Such a lack of clarity means it’s hard to gauge whether the G20 agreement will mean a big step-change in how hedge funds behave and are monitored or a set of rules which UK hedge fund firms already partially comply with and with which U.S. firms may do soon.
The Alternative Investment Management Association immediately put out a statement pointing to research that hedge funds played only a “marginal” role in the crisis and to the Turner review, which said hedge funds generally had much less leverage than banks.
But given the number of politicians who yesterday mentioned “hedge funds” and “regulation” in the same breath, the industry did learn once and for all that more rules are coming.