Money managers under the microscope
Pensioners totter to the rescue
It may look like an unlikely scenario on paper, but Europe’s elderly masses could be about to provide the killer blow to draft EU rules to regulate the alternative investment industry.
Hedge fund associations, private equity lobbyists, the British government and even the United States Treasury have waded into the debate over the proposed legislation, seeking to soften an approach which has been labelled an exercise in post-financial crisis political grandstanding, rather than a measured look at how to better regulate the sector.
Now though, the pension funds have entered the stage, and their concerns will be far more likely to win over MEPs across the politcal spectrum.
The giant schemes have pushed more and more retirement money into alternatives as they seek to diversify their portfolios and find the kind of returns that can cushion the effects of pensioners — eventually you and I — living long enough to drain the coffers dry.
They have been stung into action by the possibility that their pursuit of profit to pay future liabilities could be derailed by measures likely to remove non-EU competition from the funds marketplace, while loading punitive additional expenses on the funds that remain.
Hedge fund body Aima has clearly spotted the opportunity to ride on the coat-tails of a powerful ally and has rushed out estimates that Europe’s pension funds face a 25 billion euro hit. But they might want to cool their enthusiasm:
Pension funds have been constantly pushing for increased transparency from the hedge fund industry as their allocations increased, and are only protesting what they see as misguided regulation, not the concept of regulation itself. Should the retirement schemes succeed in forcing the tipping point which leads to changes to the draft, they will gain a powerful new bargaining tool and could even end up dictating the terms of a new era for a once secretive industry.