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Money managers under the microscope

Draft chills hedgies

April 29, 2009

The horse-trading is over (for now) and the EU has published its draft directive on regulation for the hedge fund and private equity industries. EU commissioner Charlie McCreevy must be doing something right as his plans have angered parties on both sides of the fence.

EU FlagThe Alternative Investment Management Association is furious after claiming political manouevering has riddden roughshod over its own efforts to drive a “proportionate”  industry-led solution which promised increased transparency. The Party of European Socialists (PES), meanwhile, appears equally frustrated.

PES president Poul Nyrup Rasmussen said: “Just when you thought the greed and excessive risk-taking of the speculators had finally discredited light touch regulation of financial markets, the European Commission has come forward with super-light touch regulation. It’s so light it’s fly-weight.”

The truth of the matter is that we are still a very long way from any of this making it into law and it will be a struggle to keep up the levels of anger we’ve seen over the past week. The EU parliament is not going to push this through before the presidency changes hands in July and it will be put before a new set of politicians come the next plenary session in September. The feeling from some UK officials is that legislation won’t be anywhere near its final form until at least Christmas.

The private equity industry doesn’t think it should be included in this directive at all — but it does seems to be looking ahead and taking a sanguine, long-term view. Senior figures have said they are preparing to lobby the British government to force changes to the draft — and perhaps most tellingly are preparing to exploit what it sees as a more industry-friendly Nordic region once the EU’s Swedish presidency settles in.

UPDATE: The latest from the Hedge Funds Standards Board has come out with a response which plays down the importance of the draft and accentuates the need for a deal which brings in the U.S. Antonio Borges, chairman of the HFSB, said: “The publication of the draft is the start of a long period of public consultation, in which we will certainly participate. We hope to contribute to a substantial improvement in the current proposals.” 

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