Money managers under the microscope
Andrew Baker, boss of hedge fund industry lobbyists AIMA, has taken umbrage at the “unsavoury terms” used to refer to his members.
He doesn’t like the biblical monikers of locusts or parasites and gets very prickly indeed at accusations the Mayfair money men might be socially useless.
Not fair, says Baker, and if you want to argue, he’ll set his big, new, socially-useful, mates on you.
He says the hedge fund industry these days is as much about sensibly managing money for the giant pension funds (oh.. and let’s not forget charities and universities) as it is about speculating with the spare cash of the ultra-wealthy.
As EU countries and the European Parliament thrash out final details of the AIFM Directive on hedge funds, particularly over the treatment of foreign fund managers, two reports lend firepower to those calling for a tougher line to be taken.
In its latest Financial Stability Review, the ECB says the financial crisis showed there are problems associated with hedge funds’ business models and they can add to market stress during volatile periods.
Funds take on university housing challenge – Financial Times
Jupiter dream team spurn Europe – Fund Strategy
Earlier this month we reported that the Hedge Fund Standards Board had voiced its concerns over the increased use of so-called “side letters” — preferential deals offered to some clients that could disadvantage others.
These ad-hoc deals are covered by best practice guidelines, although not formal rules, that were issued by AIMA in conjunction with the FSA. These say that managers should disclose terms that give some investors better access to their cash, although it seems that these guidelines may not always be followed to the letter by managers.
There’s no shortage of resentment in London against the EU’s planned directive on hedge funds, but the Hedge Fund Standards Board on Monday said the rules could actually create one of the problems they’re set up to avoid.
At a CSFI debate at the beautiful Innholder’s Hall in the City, HFSB executive director Thomas Deinet pointed out that, as seen all too often in the credit crisis, in falling markets a fund’s leverage automatically rises.
For UK-based opponents of the controversial EU hedge fund directive, there are signs the draft could be overhauled.
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Hedge funds are winners from recession- Democrat and Chronicle
AIMA offers revised hedge fund administrator guide- Finalternatives
After draft laws from the European Commission, which have been attacked by almost the entire UK hedge fund industry, IOSCO‘s proposals — including registration of managers, disclosure of systemically-important information to regulators, registration and supervision of prime brokers — must seem like a walk in the park.
It is still a moot point whether institutional investors are putting more money into hedge funds or taking money out.
Yesterday Antonio Borges, chairman of the Hedge Fund Standards Board, told Reuters that there had been a “dramatic reversal” since December and that institutions were “returning to the hedge fund industry in a very serious, well thought-through process”.
For all the political noise about hedge fund regulation, today’s Turner review looks like a relatively easy set of rules for the industry to stomach.
In his 126-page document, mostly about the banking sector, FSA chairman Adair Turner says the watchdog will demand more information from hedge funds and says regulators should be able make rules in areas such as capital and liquidity if hedge funds start to pose systemic risks or become “bank-like” in their activities.